10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
[ x ]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________

Commission File Number 001-10822

National Health Investors, Inc.

(Exact name of registrant as specified in its charter)

Maryland	62-1470956
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
222 Robert Rose Drive, Murfreesboro, Tennessee	37129
(Address of principal executive offices)	(Zip Code)

(615) 890-9100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ x ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes [ x ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer          [ x ]	Accelerated filer                      [ ]
Non-accelerated filer            [ ]	Smaller reporting company     [ ]
(Do not check if a smaller reporting company)	Emerging growth company     [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ x ]

There were 40,983,344 shares of common stock outstanding of the registrant as of May 5, 2017.

Table of Contents

	Page
Part I. Financial Information
Item 1. Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	42
Item 4. Controls and Procedures.	43
Part II. Other Information
Item 1. Legal Proceedings.	44
Item 1A. Risk Factors.	44
Item 6. Exhibits.	44
Signatures.	45

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	March 31, 2017			December 31, 2016
	(unaudited)
Assets:
Real estate properties:
Land	$	182,923		$	172,003
Buildings and improvements	2,396,383			2,285,122
Construction in progress	18,018			15,729
	2,597,324			2,472,854
Less accumulated depreciation	(329,173		)	(313,080		)
Real estate properties, net	2,268,151			2,159,774
Mortgage and other notes receivable, net	150,098			133,493
Cash and cash equivalents	5,685			4,832
Straight-line rent receivable	77,024			72,518
Other assets	15,021			33,016
Total Assets	$	2,515,979		$	2,403,633
Liabilities and Equity:
Debt	$	1,145,691		$	1,115,981
Accounts payable and accrued expenses	21,599			20,874
Dividends payable	38,930			35,863
Lease deposit liabilities	22,475			21,325
Total Liabilities	1,228,695			1,194,043
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.01 par value; 60,000,000 shares authorized;
40,978,934 and 39,847,860 shares issued and outstanding, respectively	410			398
Capital in excess of par value	1,254,780			1,173,588
Cumulative net income in excess of dividends	35,173			29,873
Accumulated other comprehensive (loss) income	(3,079		)	5,731
Total Stockholders' Equity	1,287,284			1,209,590
Total Liabilities and Equity	$	2,515,979		$	2,403,633

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements. The Condensed Consolidated Balance Sheet at December 31, 2016 was derived from the audited consolidated financial statements at that date.

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NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts)

	Three Months Ended
	March 31,
	2017		2016
	(unaudited)
Revenues:
Rental income	$	63,137	$	55,074
Interest income from mortgage and other notes	3,089		3,160
Investment income and other	162		784
	66,388		59,018
Expenses:
Depreciation	16,154		13,733
Interest, including amortization of debt discount and issuance costs	11,661		10,262
Legal	56		126
Franchise, excise and other taxes	267		283
General and administrative	4,108		2,929
	32,246		27,333
Income before equity-method investee, TRS tax benefit, investment and
other gains and noncontrolling interest	34,142		31,685
Loss from equity-method investee	—		(402		)
Income tax benefit attributable to taxable REIT subsidiary	—		161
Investment and other gains	10,088		1,665
Net income	44,230		33,109
Less: net income attributable to noncontrolling interest	—		(384		)
Net income attributable to common stockholders	$	44,230	$	32,725
Weighted average common shares outstanding:
Basic	39,953,804		38,401,647
Diluted	40,108,762		38,414,791
Earnings per common share:
Net income attributable to common stockholders - basic	$	1.11	$	.85
Net income attributable to common stockholders - diluted	$	1.10	$	.85

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

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NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended
	March 31,
	2017			2016
	(unaudited)
Net income	$	44,230		$	33,109
Other comprehensive income (loss):
Change in unrealized gains on securities	(26		)	2,825
Reclassification for amounts recognized in investment and other gains	(10,038		)	—
Increase (decrease) in fair value of cash flow hedge	465			(5,480		)
Reclassification for amounts recognized as interest expense	789			1,013
Total other comprehensive loss	(8,810		)	(1,642		)
Comprehensive income	35,420			31,467
Less: comprehensive income attributable to noncontrolling interest	—			(384		)
Comprehensive income attributable to common stockholders	$	35,420		$	31,083

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

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NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended
	March 31,
	2017			2016
	(unaudited)
Cash flows from operating activities:
Net income	$	44,230		$	33,109
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	16,154			13,733
Amortization	1,337			885
Straight-line rental income	(5,755		)	(5,286		)
Non-cash interest income on construction loans	(271		)	(150		)
Gain on sale of real estate	(50		)	(1,654		)
Gain on sale of marketable securities	(10,038		)	(11		)
Non-cash share-based compensation	1,523			979
Amortization of commitment fees and note receivable discounts	(104		)	(68		)
Loss from equity-method investee	—			402
Change in operating assets and liabilities:
Other assets	(657		)	110
Accounts payable, accrued expenses and other liabilities	2,306			(752		)
Net cash provided by operating activities	48,675			41,297
Cash flows from investing activities:
Investments in mortgage and other notes receivable	(28,338		)	(20,774		)
Collections of mortgage and other notes receivable	12,109			3,985
Investments in real estate	(118,011		)	(9,463		)
Investments in real estate development	(3,842		)	(7,640		)
Investments in renovations of existing real estate	(994		)	(453		)
Proceeds from disposition of real estate properties	450			3,000
Proceeds from marketable securities	18,182			17,049
Net cash used in investing activities	(120,444		)	(14,296		)
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities	29,000			22,000
Payments on term loans	(196		)	(189		)
Taxes remitted in relation to employee stock options exercised	(116		)	(218		)
Proceeds from issuance of common shares, net	79,797			—
Distributions to noncontrolling interest	—			(435		)
Dividends paid to stockholders	(35,863		)	(32,637		)
Net cash provided by (used in) financing activities	72,622			(11,479		)
Increase in cash and cash equivalents	853			15,522
Cash and cash equivalents, beginning of period	4,832			13,286
Cash and cash equivalents, end of period	$	5,685		$	28,808

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

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NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

	Three Months Ended
	March 31,
	2017		2016
	(unaudited)
Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	9,164	$	7,678
Supplemental disclosure of non-cash investing and financing activities:
Change in accounts payable related to investments in real estate development	$	824	$	450
Tenant investment in leased asset	$	1,250	$	—

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

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NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands except share and per share amounts)

	Common Stock			Capital in Excess of Par Value			Cumulative Net Income in Excess of Dividends			Accumulated Other Comprehensive (Loss) Income			Total Equity
	Shares	Amount
Balances at December 31, 2016	39,847,860	$	398	$	1,173,588		$	29,873		$	5,731		$	1,209,590
Total comprehensive income	—	—		—			44,230			(8,810		)	35,420
Issuance of common stock, net	1,123,184	12		79,785			—			—			79,797
Shares issued on stock options exercised, net of shares withheld	7,890	—		—			—			—			—
Taxes remitted on employee stock options exercised	—	—		(116		)	—			—			(116		)
Share-based compensation	—	—		1,523			—			—			1,523
Dividends declared, $0.95 per common share	—	—		—			(38,930		)	—			(38,930		)
Balances at March 31, 2017	40,978,934	$	410	$	1,254,780		$	35,173		$	(3,079	)	$	1,287,284

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

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NATIONAL HEALTH INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

(unaudited)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

We, the management of National Health Investors, Inc., (“NHI” or the “Company”) believe that the unaudited condensed consolidated financial statements of which these notes are an integral part include all normal, recurring adjustments that are necessary to fairly present the condensed consolidated financial position, results of operations and cash flows of NHI in all material respects. The Condensed Consolidated Balance Sheet at December 31, 2016 has been derived from the audited consolidated financial statements at that date. We assume that users of these condensed consolidated financial statements have read or have access to the audited December 31, 2016 consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate those contained in our most recent Annual Report on Form 10-K for the year ended December 31, 2016 have been omitted. This condensed consolidated financial information is not necessarily indicative of the results that may be expected for a full year for a variety of reasons including, but not limited to, acquisitions and dispositions, changes in interest rates, rents and the timing of debt and equity financings. For a better understanding of NHI and its condensed consolidated financial statements, we recommend reading these condensed consolidated financial statements in conjunction with the audited consolidated financial statements for the year ended December 31, 2016, which are included in our 2016 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, a copy of which is available at our web site: www.nhireit.com.

Principles of Consolidation - The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, joint ventures, partnerships and consolidated variable interest entities (“VIE”) where NHI controls the operating activities of the VIE, if any. All intercompany transactions and balances have been eliminated in consolidation. Net income is reduced by the portion of net income attributable to noncontrolling interests.

A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.

We apply Financial Accounting Standards Board (“FASB”) guidance for our arrangements with VIEs which requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of the VIE. In accordance with FASB guidance, management must evaluate each of the Company’s contractual relationships which creates a variable interest in other entities. If the Company has a variable interest and the entity is a VIE, then management must determine whether or not the Company is the primary beneficiary of the VIE. If it is determined that the Company is the primary beneficiary, NHI consolidates the VIE. We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.

At March 31, 2017, we held an interest in eight unconsolidated VIEs and, because we generally lack either directly or through related parties any material input in the activities that most significantly impact their economic performance, we have concluded that NHI is not the primary beneficiary. Accordingly, we account for our transactions with these entities and their subsidiaries at amortized cost.

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Our VIEs are summarized below by date of initial involvement. For further discussion of the nature of the relationships, including the sources of our exposure to these VIEs, see the notes to our condensed consolidated financial statements cross-referenced below.

Date	Name	Classification	Carrying Amount		Maximum Exposure to Loss		Sources of Exposure
2012	Bickford Senior Living	Notes and straight-line receivable	$	10,509,000	$	32,881,000	Notes 2, 3
2012	Sycamore Street	N/A	$	—	$	1,930,000	Note 3
2014	Senior Living Communities	Notes and straight-line receivable	$	35,013,000	$	46,864,000	Note 3
2014	Life Care Services affiliate	Notes receivable	$	75,469,000	$	84,573,000	Note 3
2015	East Lake Capital Mgmt.	Straight-line receivable	$	2,058,000	$	2,058,000	Note 2
2016	The Ensign Group developer	N/A	$	—	$	—	Note 2
2016	Senior Living Management	Notes and straight-line receivable	$	25,693,000	$	25,804,000	Note 3
2017	Ravn Senior Solutions	Straight-line receivable	$	30,000	$	30,000	Note 2

We are not obligated to provide support beyond our stated commitments to these tenants and borrowers whom we classify as VIEs, and accordingly our maximum exposure to loss as a result of these relationships is limited to the amount of our commitments, as shown above and discussed in the notes. When the above relationships involve leases, some additional exposure to economic loss is present and unquantifiable beyond that tabulated above, where we quantify potential accounting loss for those assets in which NHI has some basis. Generally, additional economic loss on a lease, if any, would be limited to that resulting from a short period of arrearage and non-payment of monthly rent before we are able to take effective remedial action, as well as costs incurred in transitioning the lease. The potential extent of such loss will be dependent upon individual facts and circumstances, cannot be quantified, and is therefore not included in the tabulation above. Typically, the only carrying amounts involving our leases are accumulated straight-line receivables.

We apply FASB guidance related to investments in joint ventures based on the type of controlling rights held by the members’ interests in limited liability companies that may preclude consolidation by the majority equity owner in certain circumstances in which the majority equity owner would otherwise consolidate the joint venture.

We have structured our joint ventures to be compliant with the provisions of the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA") which permits NHI to receive rent payments through a triple-net lease between a property company and an operating company and allows NHI the opportunity to capture additional value on the improving performance of the operating company through distributions to a taxable REIT subsidiary (“TRS”). Accordingly, through September 30, 2016, our TRS held NHI’s equity interest in an unconsolidated operating company, which we did not control, thus providing an organizational structure that allowed the TRS to engage in a broad range of activities and share in revenues that were otherwise non-qualifying income under the REIT gross income tests.

Equity-Method Investment - Through September 30, 2016, we reported our TRS’ investment in an unconsolidated entity, over whose operating and financial policies we had the ability to exercise significant influence but not control, under the equity method of accounting. Under this accounting method, our pro rata share of the entity’s earnings or losses was included in our Condensed Consolidated Statements of Income. Additionally, we adjusted our investment carrying amount to reflect our share of changes in the equity-method investee’s capital resulting from its capital transactions.

Noncontrolling Interest - We have excluded net income attributable to the noncontrolling interest from net income attributable to common shareholders in our Condensed Consolidated Statement of Income for the three months ended March 31, 2016. As of and for the three months ended March 31, 2017, we did not hold any noncontrolling interests.

Reclassifications - We have reclassified certain balances where necessary to conform the presentation of prior periods to the current period. We have combined our investment in marketable securities into other assets in our Condensed Consolidated Balance Sheets.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Earnings Per Share - The weighted average number of common shares outstanding during the reporting period is used to calculate basic earnings per common share. Diluted earnings per common share assume the exercise of stock options using the

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treasury stock method, to the extent dilutive. Diluted earnings per share also incorporate the potential dilutive impact of our 3.25% convertible senior notes due 2021. We apply the treasury stock method to our convertible debt instruments, the effect of which is that conversion will not be assumed for purposes of computing diluted earnings per share unless the average share price for the period exceeds the conversion price per share.

New Accounting Pronouncements - For a review of recent accounting pronouncements pertinent to our operations and management’s judgment as to the impact that the eventual adoption of these pronouncements will have on our financial position and results of operation, see Note 11.

NOTE 2. REAL ESTATE

As of March 31, 2017, we owned 206 health care real estate properties located in 32 states and consisting of 133 senior housing communities, 68 skilled nursing facilities, 3 hospitals and 2 medical office buildings. Our senior housing properties include assisted living facilities, senior living campuses, independent living facilities, and entrance-fee communities. These investments (excluding our corporate office of $1,267,000) consisted of properties with an original cost of approximately $2,596,057,000, rented under triple-net leases to 29 lessees.

During the three months endedMarch 31, 2017, we made investments related to real estate as described below (dollars in thousands):

Operator	Properties	Asset Class	Amount
The LaSalle Group	5	SHO	$	61,865
Prestige Care	1	SHO	26,200
Ravn Senior Solutions	2	SHO	16,100
The Ensign Group	1	SNF	15,096
			$	119,261

Ravn Senior Solutions

On February 21, 2017, we acquired two assisted living/memory-care facilities totaling 86 units in Hendersonville, North Carolina, for $16,100,000 in cash, inclusive of $100,000 in closing costs and the funding of $207,000 in specified capital improvements. We leased the facilities to Ravn Senior Solutions (“RSS”) for an initial lease term of 15 years plus renewal options. The initial annual lease rate is 7.35%, subject to fixed annual escalators.

In addition, we have committed to RSS certain earnout payments contingent on reaching and maintaining certain performance metrics. As earned, the earnout payments, totaling $1,500,000, would be due in installments of up to $1,000,000 for performance measured as of December 31, 2018, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the periods ending December 31, 2019 and/or 2020. Upon funding, contingent payments earned will be added to the lease base. The acquisition was accounted for as an asset purchase.

RSS’s relationship to NHI consists of its leasehold interests and purchase options and is considered a variable interest, analogous to a financing arrangement. RSS is structured to limit liability for potential damage claims, is capitalized for that purpose and is considered a VIE. Additionally, the master lease conveys to NHI an option to purchase a third facility currently operated by RSS.

Prestige

On March 10, 2017, we acquired a 102-unit assisted living community in Portland, Oregon for $26,200,000, inclusive of closing costs of $112,000. We leased the facility to Prestige Care (“Prestige”) under our existing master lease, which has a remaining lease term of 12 years plus renewal options. The lease provides for an initial annual lease rate of 7% plus annual escalators of 3.5% in years two through four and 2.5% thereafter. The acquisition was accounted for as an asset purchase.

In addition, we have committed to Prestige certain earnout payments contingent on reaching and maintaining specified performance metrics. If earned, the earnout payments, totaling $1,000,000, would be due in installments of up to $1,000,000 for performance measured as of December 31, 2017, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the period ending December 31, 2018. Upon funding, contingent payments earned will be added to the lease base.

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The LaSalle Group

On March 16, 2017, we acquired five memory care communities totaling 223 units in Texas and Illinois for $61,800,000 in cash plus closing costs of $65,000. We leased the facility to The LaSalle Group (“LaSalle”) for an initial lease term of 15 years. The lease provides for an initial annual lease rate of 7% plus annual escalators of 3.5% in years two through three and 2.5% thereafter.

In addition, we have committed to LaSalle certain earnout payments contingent on reaching and maintaining certain performance metrics. As earned, the earnout payments, totaling $5,000,000, would be due in installments of up to $2,500,000 for performance measured as of December 31, 2018, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the trailing periods ending December 31, 2019 and/or 2020. Upon funding, contingent payments earned will be added to the lease base. Because the facility was owner-occupied, the acquisition was accounted for as an asset purchase.

The Ensign Group

On March 24, 2017, we acquired from a developer a 126-bed skilled nursing facility in New Braunfels, Texas for a cash investment of $13,846,000 plus $1,250,000 contributed by the lessee, The Ensign Group (“Ensign”). The facility will be included under our existing master lease for the remaining lease term of 14 years plus renewal options. The initial lease rate is set at 8.35% subject to annual escalators based on prevailing inflation rates. The acquisition was accounted for as an asset purchase.

With the acquisition of the New Braunfels property, NHI has a continuing commitment to purchase, from the developer, three new skilled nursing facilities in Texas for $42,000,000 which are under construction and, upon completion, are to be leased to Legend Healthcare and subleased to Ensign. The fixed-price nature of the commitment creates a variable interest for NHI in the developer, whom NHI considers to lack sufficient equity to finance its operations without recourse to additional subordinated debt. The presence of these conditions causes the developer to be considered a VIE.

Significant Customers

Bickford

As of March 31, 2017, our Bickford Senior Living (“Bickford”) lease portfolio consists of 42 facilities, two of which are under construction and expected to open in the second and third quarters of 2017. Newly-constructed facilities have an annual lease rate of 9% at completion, after six months of free rent. NHI has a right to future Bickford acquisitions, development projects and refinancing transactions. Of these facilities, 35 were operated as a joint venture until September 30, 2016, when NHI and Sycamore, an affiliate of Bickford , entered into a definitive agreement terminating the joint venture and converting Bickford’s participation to a triple-net tenancy with assumption of existing leases and terms. Through September 30, 2016, NHI owned an 85% equity interest and Sycamore owned a 15% equity interest in our consolidated subsidiary (“PropCo”). The facilities were leased to an operating company (“OpCo”), in which NHI previously held a non-controlling 85% ownership interest. The facilities are managed by Bickford. Our joint venture was structured to comply with the provisions of RIDEA.

Of our total revenues, $9,373,000 (14%) and $6,307,000 (11%) were recognized as rental income from Bickford for the three months endedMarch 31, 2017 and 2016, including $910,000 and $(64,000) in straight-line rent income (expense), respectively.

Holiday

As of March 31, 2017, we leased 25 independent living facilities to an affiliate of Holiday Retirement (“Holiday”). The master lease term of 17 years began in December 2013 and provides for an escalator of 4.5% in 2017 and a minimum of 3.5% each year thereafter.

Of our total revenues, $10,954,000 (17%) and $10,954,000 (19%) were derived from Holiday for the three months endedMarch 31, 2017 and 2016, including $1,849,000 and $2,241,000 in straight-line rent, respectively. Our tenant operates the facilities pursuant to a management agreement with a Holiday-affiliated manager.

NHC

As of March 31, 2017, we leased 42 facilities under two master leases to National HealthCare Corporation (“NHC”), a publicly-held company and the lessee of our legacy properties. The facilities leased to NHC consist of 3 independent living facilities and 39 skilled nursing facilities (4 of which are subleased to other parties for whom the lease payments are guaranteed to us by NHC).

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These facilities are leased to NHC under the terms of an amended master lease agreement originally dated October 17, 1991 (“the 1991 lease”) which includes our 35 remaining legacy properties and a master lease agreement dated August 30, 2013 (“the 2013 lease”) which includes 7 skilled nursing facilities acquired from a third party.

The 1991 lease has been amended to extend the lease expiration to December 31, 2026. There are two additional 5-year renewal options, each at fair rental value of such leased property as negotiated between the parties and determined without including the value attributable to any improvements to the leased property voluntarily made by NHC at its expense. Under the terms of the lease, the base annual rental is $30,750,000 and rent escalates by 4% of the increase, if any, in each facility’s revenue over a 2007 base year. The 2013 lease provides for a base annual rental of $3,450,000 and has a lease expiration of August 2028. Under the terms of the 2013 lease, rent escalates 4% of the increase, if any, in each facility’s revenue over the 2014 base year. For both the 1991 lease and the 2013 lease, we refer to this additional rent component as “percentage rent.” During the last three years of the 2013 lease, NHC will have the option to purchase the facilities for $49,000,000.

The following table summarizes the percentage rent income from NHC (in thousands):

	Three Months Ended
	March 31,
	2017		2016
Current year	$	782	$	733
Prior year final certification1	194		547
Total percentage rent income	$	976	$	1,280

¹ For purposes of the percentage rent calculation described in the master lease Agreement, NHC’s annual revenue by facility for a given year is certified to NHI by March 31st of the following year.

Of our total revenues, $9,513,000 (14%) and $9,817,000 (17%) were derived from NHC for the three months endedMarch 31, 2017 and 2016, respectively.

The chairman of our board of directors is also a director on NHC’s board of directors. As of March 31, 2017, NHC owned 1,630,462 shares of our common stock.

Senior Living Communities

As of March 31, 2017, we now lease nine retirement communities totaling 1,970 units to Senior Living Communities, LLC (“Senior Living”). The 15-year master lease, which began in December 2014, contains two5-year renewal options and provides for an annual escalator of 4% in 2018 and 3% thereafter.

Of our total revenue, $11,431,000 (17%) and $9,855,000 (17%) in lease revenues were derived from Senior Living for the three months endedMarch 31, 2017 and 2016, including $1,746,000 and $1,795,000, respectively, in straight-line rent.

Disposition of Assets

On March 22, 2016, we sold a skilled nursing facility in Idaho for cash consideration of $3,000,000. The carrying value of the facility was $1,346,000, and we recorded a gain of $1,654,000. For the three months endedMarch 31, 2016, lease income from the property was $73,000.

NOTE 3. MORTGAGE AND OTHER NOTES RECEIVABLE

At March 31, 2017, we had net investments in mortgage notes receivable with a net carrying value of $102,662,000, secured by real estate and UCC liens on the personal property of 9 facilities, and other notes receivable with a carrying value of $47,436,000, guaranteed by significant parties to the notes or by cross-collateralization of properties with the same owner. No allowance for doubtful accounts was considered necessary at March 31, 2017 or December 31, 2016.

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Bickford

At March 31, 2017, our construction loans to Bickford are summarized as follows:

	Rate	Maturity	Commitment		Drawn		Location
July 2016	9%	5 years	$	14,000,000	(3,724,000	)	Illinois
January 2017	9%	5 years	14,000,000		(1,905,000	)	Michigan
			$	28,000,000	(5,629,000	)

The promissory notes are secured by first mortgage liens on substantially all real and personal property as well as a pledge of any and all leases or agreements which may grant a right of use to the subject property. Usual and customary covenants extend to the agreements, including the borrower’s obligation for payment of insurance and taxes. NHI has a purchase option on the properties at stabilization, whereby annual rent will be set with a floor of 9.55%, based on NHI’s total investment, plus fixed annual escalators.

Our loans to Bickford represent a variable interest as do our leases, which are considered to be analogous to financing arrangements. Bickford is structured to limit liability for potential claims for damages, is capitalized to achieve that purpose and is considered a VIE.

Timber Ridge

In February 2015, we entered into an agreement to lend up to $154,500,000 to LCS-Westminster Partnership III LLP (“LCS-WP”), an affiliate of Life Care Services (“LCS”) . The loan agreement conveys a mortgage interest and facilitated the construction of Phase II of Timber Ridge at Talus (“Timber Ridge”), a Type-A Continuing Care Retirement Community in Issaquah, WA managed by LCS. Our loan to LCS-WP represents a variable interest. As an affiliate of a larger company, LCS-WP is structured to limit liability for potential damage claims, is capitalized to achieve that purpose and is considered a VIE.

The loan takes the form of two notes under a master credit agreement. The senior note (“Note A”) totals $60,000,000 at a 6.75% interest rate with 10 basis-point escalators after year three, and has a term of 10 years. We have funded $51,871,000 of Note A as of March 31, 2017. Note A is interest-only and is locked to prepayment for three years. After year three, the prepayment penalty starts at 5% and declines 1% per year. The second note (“Note B”) is a construction loan for up to $94,500,000 at an annual interest rate of 8% and a five-year maturity and was fully drawn during 2016. We began receiving repayment with new resident entrance fees upon the opening of Phase II during the fourth quarter of 2016. Repayment of Note B amounted to $69,927,000 as of March 31, 2017, plus an additional $2,549,000 through May 1, 2017.

NHI has a purchase option on the entire Timber Ridge property for the greater of fair market value or $115,000,000 during a purchase option window of 120 days that will contingently open in year five or upon earlier stabilization of the development, as defined.

Senior Living Communities

In connection with the acquisition in December 2014 of the properties leased to Senior Living, we provided a $15,000,000 revolving line of credit, the maturity of which mirrors the 15-year term of the master lease. Borrowings are used to finance construction projects within the Senior Living portfolio, including building additional units. Up to $5,000,000 of the facility may be used to meet general working capital needs. Amounts outstanding under the facility, $3,261,000 at March 31, 2017, bear interest at an annual rate equal to the prevailing 10-year U.S. Treasury rate, 2.40% at March 31, 2017, plus 6%.

In March 2016, we extended two mezzanine loans of up to $12,000,000 and $2,000,000, respectively, to affiliates of Senior Living, to partially fund construction of a 186-unit senior living campus on Daniel Island in South Carolina. The loans bear interest payable monthly at a 10% annual rate and mature in March 2021. The loans are fully drawn at March 31, 2017, and provide NHI with a purchase option on the development upon its meeting certain operational metrics. The option is to remain open during the term of the loans, plus any extensions.

Our loans to Senior Living and its subsidiaries represent a variable interest as does our lease, which is considered to be analogous to a financing arrangement. Senior Living is structured to limit liability for potential claims for damages, is appropriately capitalized for that purpose and is considered a VIE.

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Senior Living Management

On August 3, 2016, we entered into an agreement to furnish to our current tenant, Senior Living Management, Inc. (“SLM”), through its affiliates, loans of up to $24,500,000 to facilitate SLM’s acquisition of five senior housing facilities that it currently operates. The loans consist of two notes under a master credit agreement, include both a mortgage and a corporate loan, and bear interest at 8.25% with terms of five years, plus optional one and two-year extensions. NHI has a right of first refusal if SLM elects to sell the facilities. The loans were fully funded as of March 31, 2017.

Our loans to SLM represent a variable interest as do our leases, which are analogous to financing arrangements. SLM is structured to limit liability for potential damage claims, is capitalized for that purpose and is considered a VIE.

NOTE 4. OTHER ASSETS

Other assets consist of the following (in thousands):

	March 31, 2017		December 31, 2016
Accounts receivable and other assets	2,703		9,017
Regulatory deposits	8,208		8,208
Reserves for replacement, insurance and tax escrows	4,110		4,046
Marketable securities (Note 7)	—		11,745
	$	15,021	$	33,016

Reserves for replacement and tax escrows include amounts required to be held on deposit in accordance with regulatory agreements governing our Fannie Mae and HUD mortgages.

NOTE 5. DEBT

Debt consists of the following (in thousands):

	March 31, 2017			December 31, 2016
Convertible senior notes - unsecured (net of discount of $4,423 and $4,717)	$	195,577		$	195,283
Revolving credit facility - unsecured	187,000			158,000
Bank term loans - unsecured	250,000			250,000
Private placement term loans - unsecured	400,000			400,000
HUD mortgage loans (net of discount of $1,466 and $1,487)	44,179			44,354
Fannie Mae term loans - secured, non-recourse	78,084			78,084
Unamortized loan costs	(9,149		)	(9,740		)
	$	1,145,691		$	1,115,981

Aggregate principal maturities of debt as of March 31, 2017 for each of the next five years and thereafter are as follows (in thousands):

Twelve months ended March 31,
2018	$	801
2019	828
2020	856
2021	437,885
2022	200,916
Thereafter	519,443
	1,160,729
Less: discount	(5,889		)
Less: unamortized loan costs	(9,149		)
	$	1,145,691

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As amended in June 2015, our $800,000,000 senior unsecured credit facility with a group of banks provides for: (1) revolving credit of $550,000,000 maturing in June 2020 (inclusive of an embedded 1-year extension option) with interest at 150 basis points over LIBOR (98 bps at March 31, 2017); (2) an existing $130,000,000 term loan that matures in June 2020 with interest at 175 basis points over LIBOR; and (3) two existing term loans which remain in place totaling $120,000,000, maturing in June 2020 and bearing interest at 175 basis points over LIBOR. The employment of interest rate swaps for our fixed term debt leaves only our revolving credit facility exposed to variable rate risk. Our swaps and the financial instruments to which they relate are described in the table below, under the caption “Interest Rate Swap Agreements.”

At March 31, 2017, we had $363,000,000 available to draw on the revolving portion of the credit facility. The unused commitment fee is 40 basis points per annum. The unsecured credit facility agreement requires that we maintain certain financial ratios within limits set by our creditors. To date, these ratios, which are calculated quarterly, have been within the limits required by the credit facility agreements.

Pinnacle Bank is a participating member of our banking group. A member of NHI’s board of directors and chairman of our audit committee is also the chairman of Pinnacle Financial Partners, Inc., the holding company for Pinnacle Bank. NHI's local banking transactions are conducted primarily through Pinnacle Bank.

Our unsecured private placement term loans are summarized below:

Amount		Inception	Maturity	Fixed Rate
$	125,000,000	January 2015	January 2023	3.99%
50,000,000		November 2015	November 2023	3.99%
75,000,000		September 2016	September 2024	3.93%
50,000,000		November 2015	November 2025	4.33%
100,000,000		January 2015	January 2027	4.51%
$	400,000,000

Terms and conditions of above term loans are similar to those under our bank credit facility with the exception of provisions regarding prepayment premiums.

In March 2015 we obtained $78,084,000 in Fannie Mae financing. The term debt financing consists of interest-only payments at an annual rate of 3.79% and a 10-year maturity. The mortgages are non-recourse and secured by thirteen properties leased to Bickford. Proceeds were used to reduce borrowings on NHI’s unsecured bank credit facility. The notes are secured by facilities having a net book value of $110,252,000 at March 31, 2017, that were previously pledged as security on Fannie Mae term debt retired in December 2014.

In March 2014 we issued $200,000,000 of 3.25% senior unsecured convertible notes due April 2021 (the “Notes”). Interest is payable April 1st and October 1st of each year. As adjusted for terms of the indenture, the Notes are convertible at a conversion rate of 14.13 shares of common stock per $1,000 principal amount, representing a conversion price of approximately $70.75 per share for a total of approximately 2,826,680 underlying shares. The conversion rate is subject to adjustment upon the occurrence of certain events, as defined in the indenture governing the Notes, but will not be adjusted for any accrued and unpaid interest except in limited circumstances. The conversion option is considered an “optional net-share settlement conversion feature,” meaning that upon conversion, NHI’s conversion obligation may be satisfied, at our option, in cash, shares of common stock or a combination of cash and shares of common stock. Because we have the ability and intent to settle the convertible securities in cash upon exercise, we use the treasury stock method to account for potential dilution. For the three months ended March 31, 2017, dilution resulting from the conversion option within our convertible debt is 98,048 shares. If NHI’s current share price increases above the adjusted $70.75 conversion price, further dilution will be attributable to the conversion feature. On March 31, 2017, the value of the convertible debt, computed as if the debt were immediately eligible for conversion, exceeded its face amount by $5,302,000.

The embedded conversion options (1) do not require net cash settlement, (2) are not conventionally convertible but can be classified in stockholders’ equity under ASC 815-40, and (3) are considered indexed to NHI’s own stock. Therefore, the conversion feature satisfies the conditions to qualify for an exception to the derivative liability rules, and the Notes are split into debt and equity components. The value of the debt component is based upon the estimated fair value of a similar debt instrument without the conversion feature at the time of issuance and was estimated to be approximately $192,238,000. The $7,762,000 difference between the contractual principal on the debt and the value allocated to the debt was recorded as the equity component and represents the estimated value of the conversion feature of the instrument. The excess of the contractual principal amount of the debt over

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its estimated fair value, the original issue discount, is amortized to interest expense using the effective interest method over the estimated term of the Notes. The effective interest rate used to amortize the debt discount and the liability component of the debt issue costs was approximately 3.9% based on our estimated non-convertible borrowing rate at the date the Notes were issued.

The total cost of issuing the Notes was $6,063,000, $275,000 of which was allocated to the equity component and $5,788,000 of which was allocated to the debt component and subject to amortization over the estimated term of the notes. The remaining unamortized balance at March 31, 2017, was $3,003,000.

Our HUD mortgage loans are secured by ten properties leased to Bickford and having a net book value of $53,882,000 at March 31, 2017. Nine mortgage notes require monthly payments of principal and interest from 4.3% to 4.4% (inclusive of mortgage insurance premium) and mature in August and October 2049. One additional HUD mortgage loan assumed in 2014 requires monthly payments of principal and interest of 2.9% (inclusive of mortgage insurance premium) and matures in October 2047. The loan has an outstanding principal balance of $9,063,000 and a net book value of $7,598,000, which approximates fair value.

The following table summarizes interest expense (in thousands):

	Three Months Ended
	March 31,
	2017			2016
Interest expense at contractual rates	$	10,822		$	9,515
Capitalized interest	(67		)	(121		)
Amortization of debt issuance costs and debt discount	906			868
Total interest expense	$	11,661		$	10,262

Interest Rate Swap Agreements

To mitigate our exposure to interest rate risk, we have entered into the following interest rate swap contracts on our bank term loans as of March 31, 2017 (dollars in thousands):

Date Entered	Maturity Date	Fixed Rate	Rate Index	Notional Amount		Fair Value
May 2012	April 2019	3.29%	1-month LIBOR	$	40,000	$	(43	)
June 2013	June 2020	3.86%	1-month LIBOR	$	80,000	$	(1,061	)
March 2014	June 2020	3.91%	1-month LIBOR	$	130,000	$	(1,919	)

See Note 10 for fair value disclosures about our variable and fixed rate debt and interest rate swap agreements.

NOTE 6. COMMITMENTS AND CONTINGENCIES

In the normal course of business, we enter into a variety of commitments, typical of which are those for the funding of revolving credit arrangements, construction and mezzanine loans to our operators to conduct expansions and acquisitions for their own account, and commitments for the funding of construction for expansion or renovation to our existing properties under lease. In our leasing operations we offer to our tenants and to sellers of newly-acquired properties a variety of inducements which originate contractually as contingencies but which may become commitments upon the satisfaction of the contingent event. Contingent payments earned will be included in the respective lease bases when funded. The tables below summarize our existing, known commitments and contingencies according to the nature of their impact on our leasehold or loan portfolios.

	Asset Class	Type	Total		Funded			Remaining
Loan Commitments:
Life Care Services Note A	SHO	Construction	$	60,000,000	$	(51,871,000	)	$	8,129,000
Bickford Senior Living	SHO	Construction	28,000,000		(5,629,000		)	22,371,000
Senior Living Communities	SHO	Revolving Credit	29,000,000		(17,261,000		)	11,739,000
			$	117,000,000	$	(74,761,000	)	$	42,239,000

See Note 3 for full details of our loan commitments. As provided above, loans funded do not include the effects of discounts or commitment fees. We expect to fully fund the Life Care Services Note A during 2017. Funding of the promissory note commitments to Bickford is expected to transpire monthly throughout 2017.

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	Asset Class	Type	Total		Funded			Remaining
Development Commitments:
Legend/The Ensign Group	SNF	Purchase	$	56,000,000	$	(14,000,000	)	$	42,000,000
Bickford Senior Living	SHO	Construction	56,500,000		(53,676,000		)	2,824,000
Chancellor Health Care	SHO	Construction	650,000		(52,000		)	598,000
East Lake/Watermark Retirement	SHO	Renovation	10,000,000		(4,016,000		)	5,984,000
Santé Partners	SHO	Renovation	3,500,000		(2,621,000		)	879,000
Bickford Senior Living	SHO	Renovation	2,400,000		—			2,400,000
East Lake Capital Management	SHO	Renovation	400,000		—			400,000
Woodland Village	SHO	Renovation	350,000		(227,000		)	123,000
			$	129,800,000	$	(74,592,000	)	$	55,208,000

We remain obligated to purchase, from a developer, three new skilled nursing facilities in Texas for $42,000,000 which are leased to Legend and subleased to Ensign. The three facilities are under construction by the developer.

We are committed to develop five senior housing facilities in Illinois and Virginia managed and leased by Bickford, each consisting of 60 private-pay assisted living and memory care units. Total costs funded includes land and development costs incurred on the project as of March 31, 2017. One facility opened in July 2016, two opened in October 2016, one opened in April 2017 and one is planned to open in the third quarter of 2017.

	Asset Class	Type	Total		Funded		Remaining
Contingencies:
East Lake Capital Management	SHO	Lease Inducement	$	8,000,000	$	—	$	8,000,000
Sycamore Street (Bickford affiliate)	SHO	Letter-of-credit	1,930,000		—		1,930,000
Ravn Senior Solutions	SHO	Earnout	1,500,000		—		1,500,000
Prestige Care	SHO	Earnout	1,000,000		—		1,000,000
The LaSalle Group	SHO	Earnout	5,000,000		—		5,000,000
			$	17,430,000	$	—	$	17,430,000

See Note 2 for a description of earnouts contingently payable to RSS, LaSalle and Prestige.

In connection with our July 2015 lease to East Lake of three senior housing properties, NHI has committed to certain lease inducement payments of $8,000,000 contingent on reaching and maintaining certain metrics, which have been assessed as not probable of payment and which we have not recorded on our balance sheet as of March 31, 2017. We are unaware of circumstances that would change our initial assessment as to the contingent lease incentives. Not included in the above table is a seller earnout of $750,000, which is recorded on our balance sheet within accounts payable and accrued expenses.

In February 2014 we entered into a commitment on a letter of credit for the benefit of Sycamore, an affiliate of Bickford, which previously held a minority interest in PropCo (see Note 2). At March 31, 2017, our commitment on the letter of credit totaled $1,930,000. As of March 31, 2017, our direct support of Sycamore is limited to our guarantee on the letter of credit established for their benefit. Sycamore, as an affiliate company of Bickford, is structured to limit liability for potential claims for damages, is capitalized to achieve that purpose and is considered a VIE.

Litigation

Our facilities are subject to claims and suits in the ordinary course of business. Our lessees and borrowers have indemnified, and are obligated to continue to indemnify us, against all liabilities arising from the operation of the facilities, and are further obligated to indemnify us against environmental or title problems affecting the real estate underlying such facilities. While there may be lawsuits pending against certain of the owners and/or lessees of the facilities, management believes that the ultimate resolution of all such pending proceedings will have no material adverse effect on our financial condition, results of operations or cash flows.

NOTE 7. INVESTMENT AND OTHER GAINS

The following table summarizes our investment and other gains (in thousands):

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	Three Months Ended
	March 31,
	2017		2016
Gains on sales of real estate	$	50	$	1,654
Gains on sales of marketable securities	10,038		11
	$	10,088	$	1,665

In January and February 2017, we recognized gains of $10,038,000 on sales totaling $11,718,000 of marketable securities with a carrying value of $11,745,000 and an adjusted cost of $1,680,000 at December 31, 2016. Total proceeds of $18,182,000 from marketable securities include settlements occurring in 2017 of $6,464,000 that resulted from sales in December 2016.

NOTE 8. SHARE-BASED COMPENSATION

We recognize share-based compensation for all stock options granted over the requisite service period using the fair value of these grants as estimated at the date of grant using the Black-Scholes pricing model, and all restricted stock granted over the requisite service period using the market value of our publicly-traded common stock on the date of grant.

Share-Based Compensation Plans

The Compensation Committee of the Board of Directors (“the Committee”) has the authority to select the participants to be granted options; to designate whether the option granted is an incentive stock option (“ISO”), a non-qualified option, or a stock appreciation right; to establish the number of shares of common stock that may be issued upon exercise of the option; to establish the vesting provision for any award; and to establish the term any award may be outstanding. The exercise price of any ISO’s granted will not be less than 100% of the fair market value of the shares of common stock on the date granted, and the term of an ISO may not be more than ten years. The exercise price of any non-qualified options granted will not be less than 100% of the fair market value of the shares of common stock on the date granted unless so determined by the Committee.

In May 2012, our stockholders approved the 2012 Stock Incentive Plan (“the 2012 Plan”) pursuant to which 1,500,000 shares of our common stock were made available to grant as share-based payments to employees, officers, directors or consultants. Through a vote of our shareholders on May 7, 2015, we increased the maximum number of shares under the plan from 1,500,000 shares to 3,000,000 shares; increased the automatic annual grant to non-employee directors from 15,000 shares to 20,000 shares; and limited the Company’s ability to re-issue shares under the Plan. As of March 31, 2017, there were 961,668 shares available for future grants under the 2012 Plan. The individual restricted stock and option grant awards vest over periods up to five years. The term of the options under the 2012 Plan is up to ten years from the date of grant.

In May 2005, our stockholders approved the NHI 2005 Stock Option Plan (“the 2005 Plan”) pursuant to which 1,500,000 shares of our common stock were made available to grant as share-based payments to employees, officers, directors or consultants. As of March 31, 2017, the 2005 Plan has expired and no additional shares may be granted under the 2005 Plan. The individual restricted stock and option grant awards vest over periods up to ten years. The term of the options outstanding under the 2005 Plan is up to ten years from the date of grant.

Compensation expense is recognized only for the awards that ultimately vest. Accordingly, forfeitures that were not expected will result in the reversal of previously recorded compensation expense. The compensation expense reported for the three months endedMarch 31, 2017 and 2016 was $1,523,000 and $979,000, respectively, and is included in general and administrative expense in the Condensed Consolidated Statements of Income.

At March 31, 2017, we had, net of expected forfeitures, $1,644,000 of unrecognized compensation cost related to unvested stock options which is expected to be expensed over the following periods: 2017 - $1,027,000, 2018 - $552,000 and 2019 - $65,000. Stock-based compensation is included in general and administrative expense in the Condensed Consolidated Statements of Income.

The weighted average fair value per share of options granted was $5.75 and $3.65 for 2017 and 2016, respectively. The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

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	2017	2016
Dividend yield	5.3%	6.2%
Expected volatility	19.7%	19.1%
Expected lives	3.3 years	2.9 years
Risk-free interest rate	1.49%	0.91%

The following table summarizes our outstanding stock options:

	Three Months Ended
	March 31,
	2017		2016
Options outstanding January 1,	541,679		741,676
Options granted under 2012 Plan	485,000		470,000
Options exercised under 2012 Plan	(25,833	)	(126,666	)
Options forfeited under 2012 Plan	(6,668	)	—
Options exercised under 2005 Plan	(15,000	)	—
Options outstanding, March 31,	979,178		1,085,010
Exercisable at March 31,	585,827		731,662

NOTE 9. EARNINGS AND DIVIDENDS PER COMMON SHARE

The weighted average number of common shares outstanding during the reporting period is used to calculate basic earnings per common share. Diluted earnings per common share assume the exercise of stock options and the conversion of our convertible debt using the treasury stock method, to the extent dilutive. If our average stock price for the period increases over the conversion price of our convertible debt, the conversion feature will be considered dilutive.

The following table summarizes the average number of common shares and the net income used in the calculation of basic and diluted earnings per common share (in thousands, except share and per share amounts):

	Three Months Ended
	March 31,
	2017		2016
Net income attributable to common stockholders	$	44,230	$	32,725
BASIC:
Weighted average common shares outstanding	39,953,804		38,401,647
DILUTED:
Weighted average common shares outstanding	39,953,804		38,401,647
Stock options	56,910		13,144
Convertible subordinated debentures	98,048		—
Average dilutive common shares outstanding	40,108,762		38,414,791
Net income per common share - basic	$	1.11	$	.85
Net income per common share - diluted	$	1.10	$	.85
Incremental shares excluded since anti-dilutive:
Net share effect of stock options with an exercise price in excess of the average market price for our common shares	19,851		75,050
Regular dividends declared per common share	$	.95	$	.90

NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS

Our financial assets and liabilities measured at fair value (based on the hierarchy of the three levels of inputs described in Note 1 to the consolidated financial statements contained in our most recent Annual Report on Form 10-K) on a recurring basis have

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included marketable securities, derivative financial instruments and contingent consideration arrangements. Marketable securities have consisted of common stock of other healthcare REITs. Derivative financial instruments include our interest rate swap agreements. Contingent consideration arrangements relate to certain provisions of recent real estate purchase agreements involving both business combinations.

Marketable securities. We utilize quoted prices in active markets to measure debt and equity securities; these items are classified as Level 1 in the hierarchy and include the common stock of other publicly held healthcare REITs.

Derivative financial instruments. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy.

Contingent consideration. Contingent consideration arrangements are classified as Level 3 and are valued using unobservable inputs about the nature of the contingent arrangement and the counter-party to the arrangement, as well as our assumptions about the probability of full settlement of the contingency.

Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):

		Fair Value Measurement
	Balance Sheet Classification	March 31, 2017		December 31, 2016
Level 1
Common stock of other healthcare REITs	Other assets	$	—	$	11,745
Level 2
Interest rate swap liability	Accounts payable and accrued expenses	$	3,022	$	4,279

Carrying values and fair values of financial instruments that are not carried at fair value at March 31, 2017 and December 31, 2016 in the Condensed Consolidated Balance Sheets are as follows (in thousands):

	Carrying Amount				Fair Value Measurement
	2017		2016		2017		2016
Level 2
Variable rate debt	$	434,109	$	404,828	$	437,000	$	408,000
Fixed rate debt	$	711,582	$	711,153	$	708,158	$	706,332
Level 3
Mortgage and other notes receivable	$	150,098	$	133,493	$	148,434	$	133,229

The fair value of mortgage and other notes receivable is based on credit risk and discount rates that are not observable in the marketplace and therefore represents a Level 3 measurement.

Fixed rate debt. Fixed rate debt is classified as Level 2 and its value is based on quoted prices for similar instruments or calculated utilizing model derived valuations in which significant inputs are observable in active markets.

Carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short-term nature. The fair value of our borrowings under our revolving credit facility are reasonably estimated at their carrying value at March 31, 2017 and December 31, 2016, due to the predominance of floating interest rates, which generally reflect market conditions.

NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014 the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 provides a principles-based approach for a broad range of revenue generating transactions, including the sale of real estate, which will generally require more estimates and more judgment and more disclosures than under current guidance. Because this ASU specifically excludes lease contracts from its scope, its application is not expected to impact our recognition of rental income on a straight-line basis. In August 2015 the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is now effective for public entities for annual periods beginning after December 15, 2017, including interim periods therein. Early adoption is permitted only as of annual reporting

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periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company plans on adopting this standard using the full retrospective adoption method on January 1, 2018. The Company’s revenue-producing contracts are primarily leases that are not within the scope of this standard. As a result, the Company does not expect the adoption of this standard to have a material impact on the timing and measurement of the Company’s rental income. The Company is continuing to evaluate the impact on other revenue sources.

In February 2016 the FASB issued ASU 2016-02, Leases. Public companies will be required to apply ASU 2016-02 for all accounting periods beginning after December 15, 2018 - for REITs this means application will be required beginning January 1, 2019. Early adoption is permitted. All leases with lease terms greater than one year are subject to ASU 2016-02 , including leases in place as of the adoption date. Management expects that, because of the ASU 2016-02’s emphasis on lessee accounting, ASU 2016-02 will not have a material impact on our accounting for leases. Consistent with present standards, NHI will continue to account for lease revenue on a straight-line basis for most leases. Also consistent with NHI’s current practice, under ASU 2016-02 only initial direct costs that are incremental to the lessor will be capitalized.

In June 2016 the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 will require more timely recognition of credit losses associated with financial assets. While current GAAP includes multiple credit impairment objectives for instruments, the previous objectives generally delayed recognition of the full amount of credit losses until the loss was probable of occurring. The amendments in ASU 2016-13, whose scope is asset-based and not restricted to financial institutions, are an improvement to existing standards in eliminating the probable initial recognition threshold in current GAAP and, instead, reflect an entity’s current estimate of all expected credit losses. Previously, when credit losses were measured under GAAP we generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU 2016-13 broaden the information that we must consider in developing our expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss that will be more useful to users of the financial statements. ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Because we are likely to continue to invest in loans and generate receivables, adoption of ASU 2016-13 in 2020 will have some effect on our accounting for these investments, though the nature of those effects will depend on the composition of our loan portfolio at that time; accordingly, we are evaluating the extent of the effects, if any, that adopting the provisions of ASU 2016-13 in 2020 will have on NHI.

In January 2017 the FASB issued ASU 2017-01, Clarifying the Definition of a Business. ASU 2017-01 will narrow the definition of a business in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business-inputs, processes, and outputs. Currently the definition of outputs contributes to broad interpretations of the definition of a business. Additionally, the Standard provides that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. For purposes of this test, land and buildings can be combined along with the intangible assets for any in-place leases. For most of NHI’s acquisitions of investment property, this screen would be met and, therefore, not meet the definition of a business. ASU 2017-01 is effective for public entities for fiscal years beginning after December 15, 2017, including interim periods. Early application of this standard is generally allowed for acquisitions acquired after the standard was issued but before the acquisition has been reflected in financial statements. We adopted the provisions of ASU 2017-01 in the first quarter of 2017. The adoption of ASU 2017-01 did not have a material effect on our consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

References throughout this document to NHI or the Company include National Health Investors, Inc., and its consolidated subsidiaries. In accordance with the Securities and Exchange Commission’s “Plain English” guidelines, this Quarterly Report on Form 10-Q has been written in the first person. In this document, the words “we”, “our”, “ours” and “us” refer only to National Health Investors, Inc. and its consolidated subsidiaries and not any other person. Unless the context indicates otherwise, references herein to “the Company” include all of our consolidated subsidiaries.

This Quarterly Report on Form 10-Q and other materials we have filed or may file with the Securities and Exchange Commission, as well as information included in oral statements made, or to be made, by our senior management contain certain “forward-looking” statements as that term is defined by the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations, cash flows, funds from operations, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, and similar statements including, without limitation, those containing words such as “may,” “will,” “believes,” “anticipates,” “expects,” “intends,” “estimates,” “plans,” and other similar expressions, are forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of factors including, but not limited to, the following:

* We depend on the operating success of our tenants and borrowers for collection of our lease and note payments;

* We depend on the success of property development and construction activities, which may fail to achieve the operating results we expect;

* We are exposed to the risk that our tenants and borrowers may become subject to bankruptcy or insolvency proceedings;

* We are exposed to risks related to governmental regulations and payors, principally Medicare and Medicaid, and the effect that lower reimbursement rates would have on our tenants’ and borrowers’ business;

* We are exposed to the risk that the cash flows of our tenants and borrowers would be adversely affected by increased liability claims and liability insurance costs;

* We are exposed to risks related to environmental laws and the costs associated with liabilities related to hazardous substances;

* We are exposed to the risk that we may not be fully indemnified by our lessees and borrowers against future litigation;

* We depend on the success of our future acquisitions and investments;

* We depend on our ability to reinvest cash in real estate investments in a timely manner and on acceptable terms;

* We may need to refinance existing debt or incur additional debt in the future, which may not be available on terms acceptable to us;

* We have covenants related to our indebtedness which impose certain operational limitations and a breach of those covenants could materially adversely affect our financial condition and results of operations;

* We are exposed to the risk that the illiquidity of real estate investments could impede our ability to respond to adverse changes in the performance of our properties;

* Certain tenants in our portfolio account for a significant percentage of the rent we expect to generate from our portfolio, and the failure of any of these tenants to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

* We depend on revenues derived mainly from fixed rate investments in real estate assets, while a portion of our debt capital used to finance those investments bear interest at variable rates. This circumstance creates interest rate risk to the Company;

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* We are exposed to the risk that our assets may be subject to impairment charges;

* We depend on the ability to continue to qualify for taxation as a real estate investment trust;

* We have ownership limits in our charter with respect to our common stock and other classes of capital stock which may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders;

* We are subject to certain provisions of Maryland law and our charter and bylaws that could hinder, delay or prevent a change in control transaction, even if the transaction involves a premium price for our common stock or our stockholders believe such transaction to be otherwise in their best interests.

See the notes to the annual audited consolidated financial statements in our most recent Annual Report on Form 10-K for the year ended December 31, 2016, and “Business” and “Risk Factors” under Item 1 and Item 1A therein for a further discussion of these and of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent in them. You should carefully consider these risks before making any investment decisions in the Company. These risks and uncertainties are not the only ones facing the Company. There may be additional risks that we do not presently know of and/or that we currently deem immaterial. If any of the risks actually occur, our business, financial condition, results of operations, or cash flows could be materially adversely affected. In that case, the trading price of our shares of stock could decline and you may lose part or all of your investment. Given these risks and uncertainties, we can give no assurance that these forward-looking statements will, in fact, occur and, therefore, caution investors not to place undue reliance on them.

Executive Overview

National Health Investors, Inc., established in 1991 as a Maryland corporation, is a self-managed real estate investment trust (“REIT”) specializing in sale-leaseback, joint-venture, mortgage and mezzanine financing of need-driven and discretionary senior housing and medical investments. Our portfolio consists of real estate investments in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities, specialty hospitals and medical office buildings. Other investments have included mortgages and other notes, marketable securities, and a joint venture structured to comply with the provisions of the REIT Investment Diversification Empowerment Act of 2007 (“RIDEA”). Through a RIDEA joint venture, we have invested in facility operations managed by independent third-parties. We fund our real estate investments primarily through: (1) operating cash flow, (2) debt offerings, including bank lines of credit and term debt, both unsecured and secured, and (3) the sale of equity securities.

Portfolio

At March 31, 2017, we had investments in real estate and mortgage and other notes receivable involving 215 facilities located in 32 states. These investments involve 138 senior housing properties, 72 skilled nursing facilities, 3 hospitals, 2 medical office buildings and other notes receivable. These investments (excluding our corporate office of $1,267,000) consisted of properties with an original cost of approximately $2,596,057,000, rented under triple-net leases to 29 lessees, and $150,098,000 aggregate net carrying value of mortgage and other notes receivable due from 11 borrowers.

Our investments in real estate are located within the United States and our investments in mortgage loans are secured by real estate located within the United States. We are managed as one unit for internal reporting and decision making. Therefore, our reporting reflects our financial position and operations as a single segment.

We classify all of the properties in our portfolio as either senior housing or medical properties. Because our leases represent different underlying revenue sources and result in differing risk profiles, we further classify our senior housing communities as either need-driven (assisted and memory care communities and senior living campuses) or discretionary (independent living and entrance-fee communities.)

Senior Housing – Need-Driven includes assisted living and memory care communities (“ALF”) and senior living campuses (“SLC”) which primarily attract private payment for services from residents who require assistance with activities of daily living. Need-driven properties are subject to regulatory oversight.

Senior Housing – Discretionary includes independent living (“ILF”) and entrance-fee communities (“EFC”) which primarily attract private payment for services from residents who are making the lifestyle choice of living in an age-restricted multi-family community that offers social programs, meals, housekeeping and in some cases access to healthcare services. Discretionary

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properties are subject to limited regulatory oversight. There is a correlation between demand for this type of community and the strength of the housing market.

Medical Facilities within our portfolio primarily receive payment from Medicare, Medicaid and health insurance. These properties include skilled nursing facilities (“SNF”), medical office buildings (“MOB”) and hospitals that attract patients who have a need for acute or complex medical attention, preventative medicine, or rehabilitation services. Medical properties are subject to state and federal regulatory oversight and, in the case of hospitals, Joint Commission accreditation.

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The following tables summarize our investments in real estate and mortgage and other notes receivable as of March 31, 2017 (dollars in thousands):

Real Estate Properties			Properties	Beds/Sq. Ft.*		Revenue		%		Investment
	Senior Housing - Need-Driven
		Assisted Living	84	4,100		$	15,409	23.3	%	$	742,375
		Senior Living Campus	10	1,323		4,041		6.1	%	162,007
		Total Senior Housing - Need-Driven	94	5,423		19,450		29.4	%	904,382
	Senior Housing - Discretionary
		Independent Living	29	3,212		11,517		17.3	%	512,322
		Entrance-Fee Communities	10	2,363		12,562		19.0	%	593,695
		Total Senior Housing - Discretionary	39	5,575		24,079		36.3	%	1,106,017
		Total Senior Housing	133	10,998		43,529		65.7	%	2,010,399
	Medical Facilities
		Skilled Nursing Facilities	68	8,813		17,435		26.3	%	524,040
		Hospitals	3	181		1,923		2.9	%	51,131
		Medical Office Buildings	2	88,517	*	250		0.4	%	10,487
		Total Medical Facilities	73			19,608		29.6	%	585,658
		Total Real Estate Properties	206			$	63,137	95.3	%	$	2,596,057
Mortgage and Other Notes Receivable
	Senior Housing - Need-Driven		4	282		$	391	0.6	%	$	19,135
	Senior Housing - Discretionary		1	400		1,424		2.2	%	75,468
	Medical Facilities		4	270		182		0.3	%	8,059
	Other Notes Receivable		—	—		1,092		1.6	%	47,436
		Total Mortgage and Other Notes Receivable	9	952		3,089		4.7	%	150,098
		Total Portfolio	215			$	66,226	100.0	%	$	2,746,155

Portfolio Summary			Properties	Beds/Sq. Ft.*		Revenue		%		Investment
	Real Estate Properties		206			$	63,137	95.3	%	$	2,596,057
	Mortgage and Other Notes Receivable		9			3,089		4.7	%	150,098
		Total Portfolio	215			$	66,226	100.0	%	$	2,746,155
Summary of Facilities by Type
	Senior Housing - Need-Driven
		Assisted Living	88	4,382		$	15,800	23.9	%	$	761,510
		Senior Living Campus	10	1,323		4,041		6.1	%	162,007
		Total Senior Housing - Need-Driven	98	5,705		19,841		30.0	%	923,517
	Senior Housing - Discretionary
		Entrance-Fee Communities	11	2,763		13,986		21.1	%	669,164
		Independent Living	29	3,212		11,518		17.4	%	512,322
		Total Senior Housing - Discretionary	40	5,975		25,504		38.5	%	1,181,486
		Total Senior Housing	138	11,680		45,345		68.5	%	2,105,003
	Medical Facilities
		Skilled Nursing Facilities	72	9,083		17,616		26.6	%	532,098
		Hospitals	3	181		1,923		2.9	%	51,131
		Medical Office Buildings	2	88,517	*	250		0.4	%	10,487
		Total Medical	77			19,789		29.9	%	593,716
	Other		—			1,092		1.6	%	47,436
		Total Portfolio	215			$	66,226	100.0	%	$	2,746,155
Portfolio by Operator Type
	Public		53			$	11,863	17.9	%	$	235,749
	National Chain (Privately-Owned)		27			11,654		17.6	%	521,139
	Regional		122			38,223		57.7	%	1,800,401
	Small		13			4,486		6.8	%	188,866
		Total Portfolio	215			$	66,226	100.0	%	$	2,746,155

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For the three months endedMarch 31, 2017, operators of facilities which provided more than 3% of our total revenues were (in alphabetical order): Bickford Senior Living; Chancellor Health Care; East Lake Capital Management; The Ensign Group; Holiday Retirement; National HealthCare Corp; and Senior Living Communities.

As of March 31, 2017, our average effective annualized rental income was $8,044 per bed for skilled nursing facilities, $12,219 per unit for senior living campuses, $15,823 per unit for assisted living facilities, $14,343 per unit for independent living facilities, $21,264 per unit for entrance fee communities, $42,499 per bed for hospitals, and $11 per square foot for medical office buildings.

Areas of Focus

We are evaluating and will potentially make additional investments during the remainder of 2017 while we continue to monitor and improve our existing properties. We seek tenants who will become mission-oriented partners in relationships where our business goals are aligned. This approach fuels steady, and thus, enduring growth for those partners and for NHI. Within the context of our growth model, we rely on a cost-effective access to debt and equity capital to finance acquisitions that will drive our earnings. There is significant competition for healthcare assets from other REITs, both public and private, and from private equity sources. Large-scale portfolios continue to command premium pricing, due to the continued abundance of private and foreign buyers seeking to invest in healthcare real estate. This combination of circumstances places a premium on our ability to execute acquisitions and negotiate leases that will generate meaningful earnings growth for our shareholders. We emphasize growth with our existing tenants and borrowers as a way to insulate us from other competition.

With lower capitalization rates for existing healthcare facilities, there has been increased interest in constructing new facilities in hopes of generating better returns on invested capital. Using our relationship-driven model, we continue to look for opportunities to support new and existing tenants and borrowers with the capital needed to expand existing facilities and to initiate ground-up development of new facilities. We concentrate our efforts in those markets where there is both a demonstrated demand for a particular product type and where we perceive we have a competitive advantage. The projects we agree to finance have attractive upside potential and are expected to provide above-average returns to our shareholders to mitigate the risks inherent with property development and construction.

On December 16, 2016, the Federal Open Market Committee of the Federal Reserve announced an increase in its benchmark federal funds rate by 25 basis points. On March 15, 2017, a second 25-basis point rate increase was announced, with two more rate increases still likely for the remainder of 2017, according to Committee guidance. The anticipation of past and further increases in the federal funds rate in the coming year has been a primary source of much volatility in REIT equity markets. As a result, there will be pressure on the spread between our cost of capital and the returns we earn. We expect that pressure to be partially mitigated by market forces that would tend to result in higher capitalization rates for healthcare assets and higher lease rates indicative of historical levels. Our cost of capital has increased over the past year as we transition some of our short term revolving borrowings into debt instruments with longer maturities and fixed interest rates. Managing long-term risk involves trade-offs with the competing alternative goal of maximizing short-term profitability. Our intention is to strike an appropriate balance between these competing interests within the context of our investor profile. As interest rates rise, our share price may decline as investors adjust prices to reflect a dividend yield that is sufficiently in excess of a risk free rate.

For the three months endedMarch 31, 2017, approximately 27% of our revenue from continuing operations was derived from operators of our skilled nursing facilities that receive a significant portion of their revenue from governmental payors, primarily Medicare and Medicaid. Such revenues are subject annually to statutory and regulatory changes and in recent years have been reduced due to federal and state budgetary pressures. Over the past five years, we have selectively diversified our portfolio by directing a significant portion of our investments into properties which do not rely primarily on Medicare and Medicaid reimbursement, but rather on private pay sources (assisted living and memory care facilities, senior living campuses, independent living facilities and entrance-fee communities). We will occasionally acquire skilled nursing facilities in good physical condition with a proven operator and strong local market fundamentals, because diversification implies a periodic rebalancing, but our recent investment focus has been on acquiring need-driven and discretionary senior housing assets.

Considering individual tenant lease revenue as a percentage of total revenue, an affiliate of Holiday Retirement is our largest independent living tenant, Bickford Senior Living is our largest assisted living tenant, National HealthCare Corporation is our largest skilled nursing tenant and Senior Living Communities is our largest entrance-fee community tenant. Our shift toward private payor facilities, as well as our expansion into the discretionary senior housing market, has further resulted in a portfolio whose current composition is relatively balanced between medical facilities, need-driven and discretionary senior housing.

We manage our business with a goal of increasing the regular annual dividends paid to shareholders. Our Board of Directors approves a regular quarterly dividend which is reflective of expected taxable income on a recurring basis. Our transactions that are infrequent and non-recurring that generate additional taxable income have been distributed to shareholders in the form of

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special dividends. Taxable income is determined in accordance with the Internal Revenue Code and differs from net income for financial statements purposes determined in accordance with U.S. generally accepted accounting principles. Our goal of increasing annual dividends requires a careful balance between identification of high-quality lease and mortgage assets in which to invest and the cost of our capital with which to fund such investments. We consider the competing interests of short and long-term debt (interest rates, maturities and other terms) versus the higher cost of new equity. We accept some level of risk associated with leveraging our investments. We intend to continue to make new investments that meet our underwriting criteria and where the spreads over our cost of capital will generate sufficient returns to our shareholders.

Our projected dividends for the current year and actual dividends for the last two years are as follows:

20171		2016		2015
$	3.80	$	3.60	$	3.40

¹Based on $.95 per common share for the first quarter of 2017, annualized

Our investments in healthcare real estate have been partially accomplished by our ability to effectively leverage our balance sheet. However, we continue to maintain a relatively low-leverage balance sheet compared with many in our peer group. We believe that our fixed charge coverage ratio, which is the ratio of Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including amounts in discontinued operations, excluding real estate asset impairments and gains on dispositions) to fixed charges (interest expense at contractual rates net of capitalized interest and principal payments on debt), and the ratio of consolidated net debt to Adjusted EBITDA are meaningful measures of our ability to service our debt. We use these two measures as a useful basis to compare the strength of our balance sheet with those in our peer group. We also believe this gives us a competitive advantage when accessing debt markets.

We calculate our fixed charge coverage ratio as approximately 5.7x for the three months ended March 31, 2017 (see our discussion of Adjusted EBITDA and a reconciliation to our net income on page 41). On an annualized basis, our consolidated net debt-to Adjusted EBITDA ratio is approximately 4.5x for the quarter ended March 31, 2017(in thousands):

Consolidated Total Debt	$	1,145,691
Less: cash and cash equivalents	(5,685		)
Consolidated Net Debt	$	1,140,006
Adjusted EBITDA	$	62,291
Annualizing Adjustment	186,873
Annualized impact of recent investments	6,596
	$	255,760
Consolidated Net Debt to Adjusted EBITDA	4.5		x

According to the Administration on Aging (“AoA”) of the US Department of Health and Human Services, in 2014, the latest year for which data are available, 46.2 million people (or 14.5% of the population) were age 65 or older in the United States. Census estimates showed that, by 2040, those 65 or older are expected to comprise 21.7% of the population.

Census estimates currently show that close to half of those currently age 65 will reach age 84 or older. As Transgenerationalaging.org notes, “The fastest-growing segment of the total population is the oldest old - those 80 and over. Their growth rate is twice that of those 65 and over and almost 4-times that for the total population. In the United States, this group now represents 10% of the older population and will more than triple from 5.7 million in 2010 to over 19 million by 2050.” If the growth rate holds steady, from 5.7 million in 2010, the oldest old will comprise close to 12 million in the US by 2030.

Per the AoA, in 2013 the median value of homes owned by older persons was $150,000 (with a median purchase price of $63,900) compared to a median home value of $160,000 for all homeowners. Of the 26.8 million households headed by older persons in 2013, 81% were homeowners, about 65% of whom owned their homes free and clear. Home ownership provides the elderly with the freedom to choose their lifestyles.

Equipped with the basics of financial security, many will be economically able enter the market for senior housing. These strong demographic trends provide the context for continued growth in senior housing in 2017 and the years ahead. We plan to fund any new real estate and mortgage investments during 2017 using our liquid assets and debt financing. Should the weight of

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additional debt resulting from new acquisitions suggest the need to rebalance our capital structure, we would then expect to access the capital markets through an ATM or other equity offerings. Our disciplined investment strategy implemented through measured increments of debt and equity sets the stage for annual dividend growth, continued low leverage, a portfolio of diversified, high-quality assets, and business relationships with experienced operators who we make our priority, continue to be the key drivers of our business plan.

Critical Accounting Policies

See our most recent Annual Report on Form 10-K for a discussion of critical accounting policies including those concerning revenue recognition, our status as a REIT, principles of consolidation, evaluation of impairments and allocation of property acquisition costs.

Significant Operators

As discussed in Note 2 to the condensed consolidated financial statements, we have four operators from whom we individually derive at least 10% of our rental income as follows (dollars in thousands):

				Rental Income
		Investment		Three Months Ended March 31,						Lease
	Asset Class	Amount		2017			2016			Renewal
Holiday Retirement	ILF	$	493,378	$	10,954	17%	$	10,954	20%	2031
Senior Living Communities	EFC	546,292		11,431		18%	9,855		18%	2029
National HealthCare Corporation	SNF	171,297		9,513		15%	9,817		18%	2026
Bickford Senior Living	ALF	403,771		9,373		15%	6,307		11%	Various
All others	Various	981,319		21,866		35%	18,141		33%	Various
		$	2,596,057	$	63,137		$	55,074

Due to a combination of longer initial lease terms and generous escalators, straight line rent constituted a significant component of rental income recognized from the Holiday and Senior Living leases, whose communities we acquired in December 2013 and 2014, respectively. Straight-line rent of $1,849,000 and $2,241,000 was recognized from the Holiday lease for the three months endedMarch 31, 2017 and 2016, respectively. Straight-line rent of $1,746,000 and $1,795,000 was recognized from the Senior Living lease for the three months endedMarch 31, 2017 and 2016, respectively. Straight-line rent of $910,000 and $(64,000) was recognized from the Bickford leases for the three months endedMarch 31, 2017 and 2016, respectively. For NHC, rent escalations are based on a percentage increase in revenue over a base year and do not give rise to non-cash, straight-line rental income.

RIDEA

On September 30, 2016, NHI and Sycamore Street, LLC (“Sycamore”), an affiliate of Bickford Senior Living (“Bickford”) entered into a definitive agreement terminating our joint venture consisting of the ownership and operation of 35 properties and converting Bickford’s participation to a triple-net tenancy with assumption of existing leases and terms. Through September 30, 2016, NHI owned an 85% equity interest and Sycamore owned a 15% equity interest in our consolidated subsidiary (“PropCo”) which owned 35 assisted living/memory care facilities, three newly-opened facilities and two facilities in development. The facilities were leased to an operating company (“OpCo”), in which NHI previously held a non-controlling 85% ownership interest. The facilities are managed by Bickford. The joint venture was structured to comply with the provisions of RIDEA. With the unwinding, NHI shareholders have become the 100% beneficiaries of our rental operations with Bickford, and we no longer share pro rata in OpCo’s results of operations.

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Investment Highlights

Since January 1, 2017, we have made or announced the following real estate and note investments ($ in thousands):

	Properties	Asset Class	Amount
Lease Investments
The LaSalle Group	5	SHO	$	61,865
Prestige Care	1	SHO	26,200
Ravn Senior Solutions	2	SHO	16,100
The Ensign Group	1	SNF	15,096
Note Investments
Bickford Senior Living	1	SHO	14,000
			$	133,261

Ravn Senior Solutions

On February 21, 2017, we acquired two assisted living/memory-care facilities totaling 86 units in Hendersonville, North Carolina, for $16,100,000 in cash, inclusive of $100,000 in closing costs and the funding of $207,000 in specified capital improvements. We leased the facilities to Ravn Senior Solutions (“RSS”) for an initial lease term of 15 years plus renewal options. The initial annual lease rate is 7.35%, subject to fixed annual escalators.

In addition, we have committed to RSS certain earnout payments contingent on reaching and maintaining certain performance metrics. As earned, the earnout payments, totaling $1,500,000, would be due in installments of up to $1,000,000 for performance measured as of December 31, 2018, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the periods ending December 31, 2019 and/or 2020. Upon funding, contingent payments earned will be added to the lease base. The acquisition was accounted for as an asset purchase.

RSS’s relationship to NHI consists of its leasehold interests and purchase options and is considered a variable interest, analogous to a financing arrangement. RSS is structured to limit liability for potential damage claims, is capitalized for that purpose and is considered a VIE. Additionally, the master lease conveys to NHI an option to purchase a third facility currently operated by RSS.

Prestige

On March 10, 2017, we acquired a 102-unit assisted living community in Portland, Oregon for $26,200,000, inclusive of closing costs of $112,000. We leased the facility to Prestige Care (“Prestige”) under our existing master lease, which has a remaining lease term of 12 years plus renewal options. The lease provides for an initial annual lease rate of 7% plus annual escalators of 3.5% in years two through four and 2.5% thereafter. The acquisition was accounted for as an asset purchase.

In addition, we have committed to Prestige certain earnout payments contingent on reaching and maintaining specified performance metrics. If earned, the earnout payments, totaling $1,000,000, would be due in installments of up to $1,000,000 for performance measured as of December 31, 2017, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the period ending December 31, 2018. Upon funding, contingent payments earned will be added to the lease base. The acquisition was accounted for as an asset purchase.

The LaSalle Group

On March 16, 2017, we acquired five memory care communities totaling 223 units in Texas and Illinois for $61,800,000 in cash plus closing costs of $65,000. We leased the facility to The LaSalle Group (“LaSalle”) for an initial lease term of 15 years. The lease provides for an initial annual lease rate of 7% plus annual escalators of 3.5% in years two through three and 2.5% thereafter.

In addition, we have committed to LaSalle certain earnout payments contingent on reaching and maintaining certain performance metrics. As earned, the earnout payments, totaling $5,000,000, would be due in installments of up to $2,500,000 for performance measured as of December 31, 2018, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the trailing periods ending December 31, 2019 and/or 2020. Upon funding, contingent payments earned will be added to the lease base. Because the facility was owner-occupied, the acquisition was accounted for as an asset purchase.

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The Ensign Group

On March 24, 2017, we acquired from a developer a 126-bed skilled nursing facility in New Braunfels, Texas for a cash investment of $13,846,000 plus $1,250,000 contributed by the lessee, The Ensign Group (“Ensign”). The facility will be included under our existing master lease for the remaining lease term of 14 years plus renewal options. The initial lease rate is set at 8.35% subject to annual escalators based on prevailing inflation rates. The acquisition was accounted for as an asset purchase.

With the acquisition of the New Braunfels property, NHI has a continuing commitment to purchase, from the developer, three new skilled nursing facilities in Texas for $42,000,000 which are under construction and, upon completion, are to be leased to Legend Healthcare and subleased to Ensign. The fixed-price nature of the commitment creates a variable interest for NHI in the developer, whom NHI considers to lack sufficient equity to finance its operations without recourse to additional subordinated debt. The presence of these conditions causes the developer to be considered a VIE.

Bickford

On January 17, 2017, we extended a construction loan facility of up to $14,000,000 to Bickford to develop and operate an assisted living/memory care community in Michigan. The total amount funded as of March 31, 2017 was $1,905,000. In accordance with provisions governing the unwinding of our joint venture with Bickford, the loan bears 9% annual interest and is subject to a five year maturity. NHI has a purchase option on the properties at stabilization, whereby rent will be set with a floor of 9.55%, based on NHI’s total investment.

Other Portfolio Activity

Our leases are typically structured as “triple net leases” on single-tenant properties having an initial leasehold term of 10 to 15 years with one or more 5-year renewal options. As such, there may be reporting periods in which we experience few, if any, lease renewals or expirations. During the three months ended March 31, 2017, we did not have any renewing or expiring leases.

Most of our existing leases contain annual escalators in rent payments. For financial statement purposes, rental income is recognized on a straight-line basis over the term of the lease. Certain of our operators hold purchase options allowing them to acquire properties they currently lease from NHI. For options open or coming open in 2017, we are engaged in negotiations to continue as lessor or in some other capacity.

Real Estate and Mortgage Write-downs

Our borrowers and tenants experience periods of significant financial pressures and difficulties similar to other health care providers. Governments at both the federal and state levels have enacted legislation to lower, or at least slow, the growth in payments to health care providers. Furthermore, the cost of professional liability insurance has increased significantly during this same period. Since inception, a number of our facility operators and mortgage loan borrowers have undergone bankruptcy. Others have been forced to surrender properties to us in lieu of foreclosure or, for certain periods, have failed to make timely payments on their obligations to us. We believe that the carrying amounts of our real estate properties are recoverable and that mortgage notes receivable are realizable and supported by the value of the underlying collateral. However, it is possible that future events could require us to make significant adjustments to these carrying amounts.

Potential Effects of Medicare Reimbursement

Our tenants who operate skilled nursing facilities receive a significant portion of their revenues from governmental payors, primarily Medicare (federal) and Medicaid (states). Changes in reimbursement rates and limits on the scope of services reimbursed to skilled nursing facilities could have a material impact on the operators’ liquidity and financial condition. The Centers for Medicare & Medicaid Services (“CMS”) released a final rule outlining a 1.6% increase in their Medicare reimbursement for fiscal 2017 beginning on October 1, 2016. We currently estimate that our borrowers and lessees will be able to withstand this nominal Medicare increase due to their credit quality, profitability and their debt or lease coverage ratios, although no assurances can be given as to what the ultimate effect that similar Medicare increases on an annual basis would have on each of our borrowers and lessees. According to industry studies, state Medicaid funding is not expected to keep pace with inflation. Federal legislative policies have been adopted and continue to be proposed that would reduce Medicare and/or Medicaid payments to skilled nursing facilities. Accordingly, for the near-term, we are treating as cautionary the Federal Government’s recent re-commitment, after debating a ‘chained CPI’ indexing, to fully index Social Security to inflation. In this cautious approach, any near-term acquisitions of skilled nursing facilities are planned on a selective basis, with emphasis on operator quality and newer construction.

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Results of Operations

The significant items affecting revenues and expenses are described below (in thousands):

	Three Months Ended
	March 31,					Period Change
	2017		2016			$			%
Revenues:
Rental income
16 leased SNFs transitioned from Legend to Ensign Group	$	4,550	$	2,390		$	2,160		90.4	%
ALFs leased to Bickford Senior Living	8,464		6,371			2,093			32.9	%
8 EFCs and 1 SLC leased to Senior Living Communities	9,685		8,060			1,625			20.2	%
1 ALF, 2 SLCs and 2 EFCs leased to East Lake Capital Management	2,263		1,171			1,092			93.3	%
ALFs leased to Chancellor Health Care	1,872		1,150			722			62.8	%
ILFs leased to an affiliate of Holiday Retirement	9,105		8,713			392			4.5	%
2 SNFs leased to Legend1	—		791			(791		)	NM
Other new and existing leases	21,443		21,142			301			1.4	%
	57,382		49,788			7,594			15.3	%
Straight-line rent adjustments, new and existing leases	5,755		5,286			469			8.9	%
Total Rental Income	63,137		55,074			8,063			14.6	%
Interest income from mortgage and other notes
SLM mortgage, mezzanine, and construction loans	465		3			462			NM
Senior Living Communities construction loan	402		150			252			NM
Timber Ridge mortgage and construction loans	1,356		1,696			(340		)	(20.0	)%
Mortgage and other notes paid off during the period	—		390			(390		)	NM
Other new and existing mortgages	866		921			(55		)	(6.0	)%
Total Interest Income from Mortgage and Other Notes	3,089		3,160			(71		)	(2.2	)%
Investment income and other	162		784			(622		)	(79.3	)%
Total Revenue	66,388		59,018			7,370			12.5	%
Expenses:
Depreciation
16 leased SNFs transitioned from Legend to Ensign Group	1,357		526			831			NM
ALFs operated by Bickford Senior Living	2,871		2,050			821			40.0	%
1 ALF, 2 SLCs and 2 EFCs leased to East Lake Capital Management	773		445			328			73.7	%
Other new and existing assets	11,153		10,712			441			4.1	%
Total Depreciation	16,154		13,733			2,421			17.6	%
Interest, including amortization of debt issuance costs and discounts	11,661		10,262			1,399			13.6	%
Payroll and related compensation expenses	1,859		1,051			808			76.9	%
Non-cash compensation expense	1,523		979			544			55.6	%
Other expenses	1,049		1,308			(259		)	(19.8	)%
	32,246		27,333			4,913			18.0	%
Income before equity-method investee, TRS tax benefit, investment and
other gains and noncontrolling interest	34,142		31,685			2,457			7.8	%
Loss from equity-method investee	—		(402		)	402			NM
Income tax benefit attributable to taxable REIT subsidiary	—		161			(161		)	NM
Investment and other gains	10,088		1,665			8,423			NM
Net income	44,230		33,109			11,121			33.6	%
Less: net income attributable to noncontrolling interest	—		(384		)	384			NM
Net income attributable to common stockholders	$	44,230	$	32,725		$	11,505		35.2	%
NM - not meaningful
1 Disposed May 2016

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Financial highlights of the quarter ended March 31, 2017, compared to the same quarter of 2016 were as follows:

• Rental income increased $8,063,000, or 14.6%, primarily as a result of new investments funded in 2016 and during the first quarter of 2017. The increase in rental income included a $469,000 increase in straight-line rent adjustments. Generally accepted accounting principles require rental income to be recognized on a straight-line basis over the term of the lease to give effect to scheduled rent escalators that are determinable at lease inception. Future increases in rental income depend on our ability to make new investments which meet our underwriting criteria.

• Interest income from mortgage and other notes decreased $71,000. We expect total interest income from our loan portfolio to decrease as repayments of our $94,500,000 construction loan to Timber Ridge began in October 2016 and we expect full repayment during 2017. Repayments amounted to $69,927,000 as of March 31, 2017, plus an additional $2,549,000 through May 1, 2017.

• Depreciation expense increased $2,421,000 primarily due to new real estate investments completed since the first quarter of 2016.

• Interest expense, including amortization of debt issuance costs and discounts, increased $1,399,000 primarily as a result of the timing and amount of new borrowings since the first quarter of 2016, a 50 bps increase in 30-day LIBOR which is the benchmark for our revolving debt, and the refinancing of $75,000,000 in September 2016 to an 8-year note with annual interest at 3.93%.

• Payroll and related expenses increased $808,000 due primarily to the addition of new corporate employees and the expense of certain incentive bonuses.

• Non-cash stock-based compensation expense increased $544,000 when compared to the prior year due to a higher estimated fair value for current year option grants based on the Black-Scholes pricing model.

• Investment and other gains includes $10,038,000 of gains on sales of marketable securities in 2017.

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Liquidity and Capital Resources

Sources and Uses of Funds

Our primary sources of cash include rent payments, principal and interest payments on mortgage and other notes receivable, interest and dividends received on our marketable securities, proceeds from the sales of real property, net proceeds from offerings of equity securities and borrowings from our term loans and revolving credit facility. Our primary uses of cash include debt service payments (both principal and interest), new investments in real estate and notes, dividend distributions to our shareholders and general corporate overhead.

These sources and uses of cash are reflected in our Condensed Consolidated Statements of Cash Flows as summarized below (dollars in thousands):

	Three Months Ended March 31,						One Year Change
	2017			2016			$			%
Cash and cash equivalents at beginning of period	$	4,832		$	13,286		$	(8,454	)	(63.6	)%
Net cash provided by operating activities	48,675			41,297			7,378			17.9	%
Net cash used in investing activities	(120,444		)	(14,296		)	(106,148		)	NM
Net cash provided by (used in) financing activities	72,622			(11,479		)	84,101			NM
Cash and cash equivalents at end of period	$	5,685		$	28,808		$	(23,123	)	(80.3	)%

Operating Activities – Net cash provided by operating activities for the three months ended March 31, 2017 increased as compared to 2016 primarily as a result of the collection of lease payments on new real estate investments since March 2016.

Investing Activities – Net cash used in investing activities for the three months ended March 31, 2017 increased primarily due to $151,185,000 of investments in real estate and notes which were partially offset by the collection of principal on mortgage and other notes receivable and sales of marketable securities.

Financing Activities – The change in net cash related to financing activities for the three months ended March 31, 2017 compared to the same period in 2016 is primarily the result of net borrowings of $29,000,000 on our revolving credit facility and $79,797,000 in proceeds from stock issuances. These capital sources were partially offset by dividends paid to stockholders which increased $3,226,000 over the same period in 2016 due to a 5.6% increase in our per share dividend and the issuance of additional common shares.

Liquidity

At March 31, 2017, our liquidity was strong, with $368,685,000 available in cash and borrowing capacity on our revolving credit facility.

Our ATM program, discussed below, represents an additional source of liquidity. Traditionally, debt financing and cash resulting from operating and financing activities, which are derived from proceeds of lease and mortgage collections, loan payoffs and the recovery of previous write-downs, have been used to satisfy our operational and investing needs and to provide a return to our shareholders. Those operational and investing needs reflect the resources necessary to maintain and cultivate our funding sources and have generally fallen into three categories: debt service, REIT operating expenses, and new real estate investments.

In June 2015, we entered into an amended $800,000,000 senior unsecured credit facility with a group of banks. The facility can be expanded, subject to certain conditions, up to an additional $250,000,000. The amended credit facility provides for: (1) a $550,000,000 revolving credit facility that matures in June 2020 (inclusive of an embedded 1-year extension option) with interest at 150 basis points over 30-day LIBOR (98 bps at March 31, 2017); (2) an existing $130,000,000 term loan that matures in June 2020 with interest at 175 basis points over LIBOR of which interest of 3.91% is fixed with an interest rate swap agreement; and (3) two existing term loans which also remain in place totaling $120,000,000, maturing in June 2020 and bearing interest at 175 basis points over LIBOR,with a notional amount of $40,000,000 being fixed at 3.29% until 2019 and $80,000,000 being fixed at 3.86% until 2020.

At March 31, 2017, we had $363,000,000 available to draw on the revolving portion of the credit facility. The unused commitment fee is 40 basis points per annum. The unsecured credit facility requires that we maintain certain financial ratios within limits set by our creditors. To date, these ratios, which are calculated quarterly, have been within the limits required by the credit facility agreements.

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We began liquidating our position in LTC Properties, Inc. (“LTC”) common stock in the fourth quarter of 2015, realizing cumulative total proceeds of $91,136,000 through December 31, 2016. In January and February of 2017, we sold our remaining 250,000 shares, realizing further net proceeds of $11,718,000 from these sales. A taxable gain of approximately $10,038,000 resulted from the 2017 sales and is expected to be adequately offset by depreciation and other deductions in the calculation of our REIT taxable income, making these proceeds available for deployment. Total proceeds of $18,182,000 from marketable securities include settlements occurring in 2017 of $6,464,000 that resulted from sales in December 2016.

In March 2017, we accessed our at-the market (“ATM”) equity program. With an average price for shares sold of $72.31, we issued 1,123,184 common shares resulting in net proceeds of $79,797,000, which we used to pay down our revolving credit facility.

We intend to use future proceeds from the ATM program for general corporate purposes, which may include future acquisitions and repayment of indebtedness, including borrowings under our credit facility. The ATM offerings were made pursuant to a prospectus dated February 22, 2017, which constitutes a part of NHI’s effective shelf registration statement that was previously filed with the Securities and Exchange Commission.

We used proceeds from our ATM in combination with sales of LTC common stock to rebalance our leverage in response to our first quarter acquisitions. We continue to explore various other funding sources including bank term loans, convertible debt, traditional equity placement, unsecured bonds and senior notes, debt private placement and secured government agency financing. We view our ATM program as an effective way to match-fund our smaller acquisitions by exercising control over the timing and size of transactions and achieving a more favorable cost of capital as compared to larger follow-on offerings.

We expect that borrowings on our revolving credit facility and our ATM program will allow us to continue to make real estate investments during the coming year. However, we anticipate that our historically low cost of debt capital will rise in the near to mid-term, as the federal government continues its upward transitioning of the Federal funds rate. In response to the changed interest-rate environment, we may find it advisable within the coming year to acquire a public credit rating as a tool for managing our interest costs.

We may from time to time seek to retire or purchase some of our outstanding convertible notes through cash purchases in open market purchases, privately-negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

If we modify or replace existing debt, we would incur debt issuance costs. These fees would be subject to amortization over the term of the new debt instrument and may result in the write-off of fees associated with debt which has been replaced or modified. Sustaining long-term dividend growth will require that we consider all forms of capital mentioned above, with the goal of maintaining a low-leverage balance sheet as mitigation against potential adverse changes in the business of our tenants and borrowers.

To mitigate our exposure to interest rate risk, we have entered into the following interest rate swap contracts on three of our term loans as of March 31, 2017 (dollars in thousands):

Date Entered	Maturity Date	Fixed Rate	Rate Index	Notional Amount		Fair Value
May 2012	April 2019	3.29%	1-month LIBOR	$	40,000	$	(43	)
June 2013	June 2020	3.86%	1-month LIBOR	$	80,000	$	(1,061	)
March 2014	June 2020	3.91%	1-month LIBOR	$	130,000	$	(1,919	)

For instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”), and reclassified into earnings in the same period, or periods, during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in earnings. Hedge ineffectiveness related to our cash flow hedges, which is reported in current period earnings as interest expense, was not significant for the three months ended March 31, 2017 and 2016.

We intend to comply with REIT dividend requirements that we distribute at least 90% of our annual taxable income for the years ending December 2017 and thereafter. Dividends declared for the fourth quarter of each fiscal year are paid by the end of the following January and are, with some exceptions, treated for tax purposes as having been paid in the fiscal year just ended as provided in IRS Code Sec. 857(b)(8). We declare special dividends when we compute our REIT taxable income in an amount that exceeds our regular dividends for the fiscal year.

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Off Balance Sheet Arrangements

We currently have no outstanding guarantees. For additional information on our letter of credit with Sycamore, an affiliate of Bickford, see our discussion in this section under Contractual Obligations and Contingent Liabilities below. As described in Note 1 to the condensed consolidated financial statements, our loans and leases with certain entities represent variable interests in those enterprises. However, because we do not control these entities, nor do we have any role in their day-to-day management, we are not their primary beneficiary. Except as discussed below under Contractual Obligations and Contingent Liabilities, we have no further material obligations arising from our transactions with these entities, and we believe our maximum exposure to loss at March 31, 2017, due to these off-balance sheet items, would be limited to our contractual commitments and contingent liabilities and the amount of our current investments with them, as detailed further in Notes 3 and 6 to the condensed consolidated financial statements.

In March 2014 we issued $200,000,000 of convertible notes, the conversion feature being intended to broaden the Company’s credit profile and as a means to obtain a more favorable coupon rate. For this feature we calculate the dilutive effect using market prices prevailing over the reporting period. Because the dilution calculation is market-driven, and per share guidance we provide is based on diluted amounts, the theoretical effects of the conversion feature result in per share unpredictability.

Additional disclosure requirements also give widely ranging results depending on market price variability. The notes will be freely convertible in the last six months of their contractual life, beginning in the fourth quarter of 2020; however, generally accepted accounting principles require us to periodically report the amount by which the notes’ convertible value exceeds their principal amount, without regard to the current availability of the conversion feature. Further, the mechanics of the calculation require the use of an end-of-period stock price, so that using that amount at March 31, 2017, delivers an excess of $5,302,000, whereas the use of another price point would give a different result.

The conversion feature is generally available to the bondholders entering the last six months of the notes’ term but may also become actionable if the market price of NHI’s common stock should, for 20 of 30 consecutive trading days within a calendar quarter, sustain a level in excess of 130% of the adjustedconversion price. The notes are “optional net-share settlement” instruments, meaning that NHI has the ability and intent to settle the principal amount of the indebtedness in cash, with possible dilutive share issuances for any excess, at NHI’s option. Settlement of the notes will require management to allocate the consideration we ultimately pay between the debt component and the equity conversion feature as though they were separate instruments. The allocation is effected by valuing the debt component first, with any remainder allocated to the conversion feature. Amounts expended to settle the notes will be recognized first as a settlement of the notes at par and then will be recognized in income to the extent the portion allocated to the debt instrument differs from par value. The remainder of the allocation, if any, will be treated as settlement of equity and adjusted through our paid in capital account.

Contractual Obligations and Contingent Liabilities

As of March 31, 2017, our contractual payment obligations were as follows (in thousands):

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Debt, including interest1	$	1,418,114	$	33,230	$	562,736	$	434,064	$	388,084
Real estate purchase liabilities	42,000		14,000		28,000		—		—
Construction commitments	13,542		13,542		—		—		—
Loan commitments	42,239		42,239		—		—		—
	$	1,515,895	$	103,011	$	590,736	$	434,064	$	388,084

¹ Interest is calculated based on the weighted average interest rate of outstanding debt balances as of March 31, 2017. The calculation also includes an unused commitment fee of .40%.

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Commitments and Contingencies

The following tables summarize information as of March 31, 2017 related to our outstanding commitments and contingencies which are more fully described in the notes to the consolidated financial statements.

	Asset Class	Type	Total		Funded			Remaining
Loan Commitments:
Life Care Services Note A	SHO	Construction	$	60,000,000	$	(51,871,000	)	$	8,129,000
Bickford Senior Living	SHO	Construction	28,000,000		(5,629,000		)	22,371,000
Senior Living Communities	SHO	Revolving Credit	29,000,000		(17,261,000		)	11,739,000
			$	117,000,000	$	(74,761,000	)	$	42,239,000

See Note 3 to the condensed consolidated financial statements for full details of our loan commitments. As provided above, loans funded do not include the effects of discounts or commitment fees. We expect to fully fund the Life Care Services Note A during 2017. Funding of the promissory note commitment to Bickford is expected to transpire monthly throughout 2017.

	Asset Class	Type	Total		Funded			Remaining
Development Commitments:
Legend/The Ensign Group	SNF	Purchase	$	56,000,000	$	(14,000,000	)	$	42,000,000
Bickford Senior Living	SHO	Construction	56,500,000		(53,676,000		)	2,824,000
Chancellor Health Care	SHO	Construction	650,000		(52,000		)	598,000
East Lake/Watermark Retirement	SHO	Renovation	10,000,000		(4,016,000		)	5,984,000
Santé Partners	SHO	Renovation	3,500,000		(2,621,000		)	879,000
Bickford Senior Living	SHO	Renovation	2,400,000		—			2,400,000
East Lake Capital Management	SHO	Renovation	400,000		—			400,000
Woodland Village	SHO	Renovation	350,000		(227,000		)	123,000
			$	129,800,000	$	(74,592,000	)	$	55,208,000

We remain obligated to purchase, from a developer, three new skilled nursing facilities in Texas for $42,000,000 which are leased to Legend and subleased to Ensign. The three facilities are under construction by the developer.

We are committed to the development of five senior housing facilities in Illinois and Virginia leased and managed by Bickford, each consisting of 60 private-pay assisted living and memory care units. Total costs funded includes land and development costs incurred on the project as of March 31, 2017. One facility opened in July 2016, two opened in October 2016, one opened in April 2017 and one is planned to open in the third quarter of 2017.

	Asset Class	Type	Total		Funded		Remaining
Contingencies:
East Lake Capital Management	SHO	Lease Inducement	$	8,000,000	$	—	$	8,000,000
Sycamore Street (Bickford affiliate)	SHO	Letter-of-credit	1,930,000		—		1,930,000
Ravn Senior Solutions	SHO	Lease Inducement	1,500,000		—		1,500,000
Prestige Care	SHO	Lease Inducement	1,000,000		—		1,000,000
The LaSalle Group	SHO	Lease Inducement	5,000,000		—		5,000,000
			$	17,430,000	$	—	$	17,430,000

See Note 2 to the condensed consolidated financial statements for a description of contingent earnouts made to Ravn, LaSalle and Prestige.

In connection with our July 2015 lease to East Lake of three senior housing properties, NHI has committed to certain lease inducement payments of $8,000,000 contingent on reaching and maintaining certain metrics. We are unaware of circumstances that would change our initial assessment as to the contingent lease incentives. Not included in the above table is a seller earnout of $750,000, which is recorded on our balance sheet within accounts payable and accrued expenses.

In February 2014 we entered into a commitment on a letter of credit for the benefit of Sycamore, an affiliate of Bickford, which previously held a minority interest in PropCo (see Note 2). At March 31, 2017, our commitment on the letter of credit totaled $1,930,000. As of March 31, 2017, our direct support of Sycamore is limited to our guarantee on the letter of credit established

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for their benefit. Sycamore, as an affiliate company of Bickford, is structured to limit liability for potential claims for damages, is capitalized to achieve that purpose and is considered a VIE.

Litigation

Our facilities are subject to claims and suits in the ordinary course of business. Our lessees and borrowers have indemnified, and are obligated to continue to indemnify us, against all liabilities arising from the operation of the facilities, and are further obligated to indemnify us against environmental or title problems affecting the real estate underlying such facilities. While there may be lawsuits pending against certain of the owners and/or lessees of the facilities, management believes that the ultimate resolution of all such pending proceedings will have no material adverse effect on our financial condition, results of operations or cash flows.

FFO, AFFO & FAD

These supplemental operating performance measures may not be comparable to similarly titled measures used by other REITs. Consequently, our Funds From Operations (“FFO”), Normalized FFO, Normalized Adjusted Funds From Operations (“AFFO”) and Normalized Funds Available for Distribution (“FAD”) may not provide a meaningful measure of our performance as compared to that of other REITs. Since other REITs may not use our definition of these operating performance measures, caution should be exercised when comparing our Company’s FFO, Normalized FFO, Normalized AFFO and Normalized FAD to that of other REITs. These financial performance measures do not represent cash generated from operating activities in accordance with generally accepted accounting principles (“GAAP”) (these measures do not include changes in operating assets and liabilities) and therefore should not be considered an alternative to net earnings as an indication of operating performance, or to net cash flow from operating activities as determined by GAAP as a measure of liquidity, and are not necessarily indicative of cash available to fund cash needs.

Funds From Operations - FFO

Our FFO per diluted common share for the three months endedMarch 31, 2017increased$0.34 (29.3%) over the same period in 2016. FFO increased primarily as the result of our new real estate investments since March 2016 and $10,038,000 of gains recognized on the sale of marketable securities. FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and applied by us, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures, if any. The Company’s computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or have a different interpretation of the current NAREIT definition from that of the Company; therefore, caution should be exercised when comparing our Company’s FFO to that of other REITs. Diluted FFO assumes the exercise of stock options and other potentially dilutive securities.

Our normalized FFO per diluted common share for the three months endedMarch 31, 2017increased$0.09 (7.8%) over the same period in 2016. Normalized FFO increased primarily as the result of our new real estate investments since March 2016. Normalized FFO excludes from FFO certain items which, due to their infrequent or unpredictable nature, may create some difficulty in comparing FFO for the current period to similar prior periods, and may include, but are not limited to, impairment of non-real estate assets, gains and losses attributable to the acquisition and disposition of assets and liabilities, and recoveries of previous write-downs.

FFO and normalized FFO are important supplemental measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative, and should be supplemented with a measure such as FFO. The term FFO was designed by the REIT industry to address this issue.

Adjusted Funds From Operations - AFFO

Our normalized AFFO per diluted common share for the three months endedMarch 31, 2017increased$0.09 (8.7%) over the same period in 2016 due primarily to the impact of real estate investments completed since March 2016. In addition to the adjustments included in the calculation of normalized FFO, normalized AFFO excludes the impact of any straight-line rent revenue, amortization of the original issue discount on our convertible senior notes and amortization of debt issuance costs.

Normalized AFFO is an important supplemental measure of operating performance for a REIT. GAAP requires a lessor to recognize contractual lease payments into income on a straight-line basis over the expected term of the lease. This straight-line

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adjustment has the effect of reporting lease income that is significantly more or less than the contractual cash flows received pursuant to the terms of the lease agreement. GAAP also requires the original issue discount of our convertible senior notes and debt issuance costs to be amortized as non-cash adjustments to earnings. Normalized AFFO is useful to our investors as it reflects the growth inherent in the contractual lease payments of our real estate portfolio.

Funds Available for Distribution - FAD

Our normalized FAD for the three months endedMarch 31, 2017increased$5,930,000 (14.4%) over the same period in 2016, due primarily to the impact of real estate investments completed since March 2016. In addition to the adjustments included in the calculation of normalized AFFO, normalized FAD excludes the impact of non-cash stock based compensation. Normalized FAD is an important supplemental measure of operating performance for a REIT as a useful indicator of the ability to distribute dividends to shareholders.

39

The following table reconciles net income attributable to common stockholders, the most directly comparable GAAP metric, to FFO, Normalized FFO, Normalized AFFO and Normalized FAD and is presented for both basic and diluted weighted average common shares (in thousands, except share and per share amounts):

	Three Months Ended
	March 31,
	2017			2016
Net income attributable to common stockholders	$	44,230		$	32,725
Elimination of certain non-cash items in net income:
Depreciation	16,154			13,733
Depreciation related to noncontrolling interest	—			(307		)
Net gain on sales of real estate	(50		)	(1,654		)
NAREIT FFO attributable to common stockholders	60,334			44,497
Gain on sale of marketable securities	(10,038		)	—
Normalized FFO attributable to common stockholders	50,296			44,497
Straight-line lease revenue, net	(5,755		)	(5,286		)
Straight-line lease revenue, net, related to noncontrolling interest	—			(10		)
Amortization of original issue discount	293			282
Amortization of debt issuance costs	612			586
Amortization of debt issuance costs related to noncontrolling interest	—			(9		)
Normalized AFFO	45,446			40,060
Non-cash share based compensation	1,523			979
Normalized FAD	$	46,969		$	41,039
BASIC
Weighted average common shares outstanding	39,953,804			38,401,647
NAREIT FFO per common share	$	1.51		$	1.16
Normalized FFO per common share	$	1.26		$	1.16
Normalized AFFO per common share	$	1.14		$	1.04
DILUTED
Weighted average common shares outstanding	40,108,762			38,414,791
NAREIT FFO per common share	$	1.50		$	1.16
Normalized FFO per common share	$	1.25		$	1.16
Normalized AFFO per common share	$	1.13		$	1.04

40

Adjusted EBITDA

We consider Adjusted EBITDA to be an important supplemental measure because it provides information which we use to evaluate our performance and serves as an indication of our ability to service debt. We define Adjusted EBITDA as consolidated earnings before interest, taxes, depreciation and amortization, including amounts in discontinued operations, excluding real estate asset impairments and gains on dispositions and certain items which, due to their infrequent or unpredictable nature, may create some difficulty in comparing Adjusted EBITDA for the current period to similar prior periods, and may include, but are not limited to, impairment of non-real estate assets, gains and losses attributable to the acquisition and disposition of assets and liabilities, and recoveries of previous write-downs. Since others may not use our definition of Adjusted EBITDA, caution should be exercised when comparing our Adjusted EBITDA to that of other companies.

The following table reconciles net income, the most directly comparable GAAP metric, to Adjusted EBITDA:

	Three Months Ended
	March 31,
	2017			2016
Net income	$	44,230		$	33,109
Interest expense at contractual rates	10,822			9,515
Franchise, excise and other taxes	267			283
Income tax (benefit) of taxable REIT subsidiary	—			(161		)
Depreciation	16,154			13,733
Amortization of debt issuance costs and bond discount	906			868
Net gain on sales of real estate	(50		)	(1,654		)
Gain on sale of marketable securities	(10,038		)	—
Adjusted EBITDA	$	62,291		$	55,693
Interest expense at contractual rates	$	10,822		$	9,515
Principal payments	196			189
Fixed Charges	$	11,018		$	9,704
Fixed Charge Coverage	5.7x			5.7x

41

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

At March 31, 2017, we were exposed to market risks related to fluctuations in interest rates on approximately $187,000,000 of variable-rate indebtedness (excludes $250,000,000 of variable-rate debt that has been hedged through interest-rate swap contracts) and on our mortgage and other notes receivable. The unused portion ($363,000,000 at March 31, 2017) of our revolving credit facility, should it be drawn upon, is subject to variable rates.

Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and loans receivable unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. Conversely, changes in interest rates on variable rate debt and investments would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. Assuming a 50 basis point increase or decrease in the interest rate related to variable-rate debt, and assuming no change in the outstanding balance as of March 31, 2017, net interest expense would increase or decrease annually by approximately $935,000 or $0.02 per common share on a diluted basis.

We use derivative financial instruments in the normal course of business to mitigate interest rate risk. We do not use derivative financial instruments for speculative purposes. Derivatives are included in the condensed Consolidated Balance Sheets at their fair value. We may engage in hedging strategies to manage our exposure to market risks in the future, depending on an analysis of the interest rate environment and the costs and risks of such strategies.

The following table sets forth certain information with respect to our debt (dollar amounts in thousands):

	March 31, 2017						December 31, 2016
	Balance1		% of total		Rate5		Balance1		% of total		Rate5
Fixed rate:
Convertible senior notes	$	200,000	17.2	%	3.25	%	$	200,000	17.7	%	3.25	%
Unsecured term loans2	650,000		56.0	%	4.01	%	650,000		57.4	%	4.01	%
HUD mortgage loans3	45,645		3.9	%	4.04	%	45,841		4.0	%	4.04	%
Fannie Mae mortgage loans4	78,084		6.8	%	3.79	%	78,084		6.9	%	3.79	%
Variable rate:
Unsecured revolving credit facility	187,000		16.1	%	2.48	%	158,000		14.0	%	2.27	%
	$	1,160,729	100.0	%	3.62	%	$	1,131,925	100.0	%	3.62	%
1 Differs from carrying amount due to unamortized discount and debt issuance costs.
2 Includes five term loans in 2015; rate is a weighted average.
3 Includes 10 HUD mortgages; rate is a weighted average inclusive of a mortgage insurance premium
4 Includes 13 Fannie Mae mortgages
5 Total is weighted average rate

The unsecured term loans in the table above reflect the effect of $40,000,000, $80,000,000, and $130,000,000 notional amount interest rate swaps with maturities of April 2019, June 2020 and June 2020, respectively, that effectively converts variable rate debt to fixed rate debt. These loans bear interest at LIBOR plus a spread, currently 175 basis points, based on our Consolidated Coverage Ratio, as defined.

42

To highlight the sensitivity of our convertible senior notes and secured mortgage debt to changes in interest rates, the following summary shows the effects on fair value (“FV”) assuming a parallel shift of 50 basis points (“bps”) in market interest rates for a contract with similar maturities as of March 31, 2017(dollar amounts in thousands):

	Balance		Fair Value1		FV reflecting change in interest rates
Fixed rate:					-50 bps		+50 bps
Private placement term loans - unsecured	$	400,000	$	391,453	$	404,288	$	379,087
Convertible senior notes	200,000		195,895		199,766		192,102
Fannie Mae mortgage loans	78,084		75,652		78,300		73,103
HUD mortgage loans	45,645		45,158		48,415		42,204
1 The change in fair value of our fixed rate debt was due primarily to the overall change in interest rates.

At March 31, 2017, the fair value of our mortgage and other notes receivable, discounted for estimated changes in the risk-free rate, was approximately $148,434,000. A 50 basis point increase in market rates would decrease the estimated fair value of our mortgage and other loans by approximately $3,220,000, while a 50 basis point decrease in such rates would increase their estimated fair value by approximately $3,324,000.

Item 4. Controls and Procedures.

Evaluation of Disclosure Control and Procedures. As of March 31, 2017, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Accounting Officer (“CAO”), of the effectiveness of the design and operation of management’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) to ensure information required to be disclosed in our filings under the Securities and Exchange Act of 1934, is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms; and (ii) accumulated and communicated to our management, including our CEO and our CAO, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving desired control objectives, and management is necessarily required to apply its judgment when evaluating the cost-benefit relationship of potential controls and procedures. Based upon the evaluation, the CEO and CAO concluded that the design and operation of these disclosure controls and procedures were effective as of March 31, 2017.

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting identified in management’s evaluation during the three months ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

43

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Our health care facilities are subject to claims and suits in the ordinary course of business. Our lessees and borrowers have indemnified, and are obligated to continue to indemnify us, against all liabilities arising from the operation of the facilities, and are further obligated to indemnify us against environmental or title problems affecting the real estate underlying such facilities. While there may be lawsuits pending against certain of the owners and/or lessees of our facilities, management believes that the ultimate resolution of all such pending proceedings will have no material adverse effect on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors.

During the three months ended March 31, 2017, there were no material changes to the risk factors that were disclosed in Item 1A of National Health Investors, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016.

Item 6. Exhibits.

Exhibit No.	Description
3.1	Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form S-11 Registration Statement No. 33-41863)
3.2	Amendment to Articles of Incorporation (incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement filed March 23, 2009)
3.3	Amendment to Articles of Incorporation approved by shareholders on May 2, 2014 (incorporated by reference to Exhibit 3.3 to the Form 10-Q filed August 4, 2014)
3.4	Restated Bylaws (incorporated by reference to Exhibit 3.3 to Form 10-K filed February 15, 2013)
3.5	Amendment No. 1 to Restated Bylaws dated February 14, 2014 (incorporated by reference to Exhibit 3.4 to Form 10-K filed February 14, 2014)
4.1	Form of Common Stock Certificate (incorporated by reference to Exhibit 39 to Form S-11 Registration Statement No. 33-41863)
4.2	Indenture, dated as of March 25, 2014, between National Health Investors, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed March 31, 2014)
4.3	First Supplemental Indenture, dated as of March 25, 2014, to the Indenture, dated as of March 25, 2014, between National Health Investors, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to Form 8-K filed March 31, 2014)
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

44

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NATIONAL HEALTH INVESTORS, INC.
		(Registrant)
Date:	May 8, 2017	/s/ D. Eric Mendelsohn
		D. Eric Mendelsohn
		President and Chief Executive Officer,
Date:	May 8, 2017	/s/ Roger R. Hopkins
		Roger R. Hopkins
		Chief Accounting Officer
		(Principal Financial Officer and Principal Accounting Officer)

45

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, D. Eric Mendelsohn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of the registrant, National Health Investors, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 8, 2017	/s/ D. Eric Mendelsohn
		D. Eric Mendelsohn
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Roger R. Hopkins, certify that:

1. I have reviewed this quarterly report on Form 10-Q of the registrant, National Health Investors, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions) :

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 8, 2017	/s/ Roger R. Hopkins
		Roger R. Hopkins
		Chief Accounting Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that, to the undersigned's best knowledge and belief, the quarterly report on Form 10-Q for National Health Investors, Inc. ("Issuer") for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"):

(a) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date:	May 8, 2017	/s/ D. Eric Mendelsohn
		D. Eric Mendelsohn
		President and Chief Executive Officer,
Date:	May 8, 2017	/s/ Roger R. Hopkins
		Roger R. Hopkins
		Chief Accounting Officer
		(Principal Financial Officer and Principal Accounting Officer)

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 05, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Entity Registrant Name	NATIONAL HEALTH INVESTORS INC
Entity Central Index Key	0000877860
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		40,981,915

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Assets
Land	$ 182,923	$ 172,003
Buildings and improvements	2,396,383	2,285,122
Construction in progress	18,018	15,729
Real estate properties, gross	2,597,324	2,472,854
Less accumulated depreciation	(329,173)	(313,080)
Real estate properties, net	2,268,151	2,159,774
Mortgage and other notes receivable, net	150,098	133,493
Cash and cash equivalents	5,685	4,832
Straight-line rent receivable	77,024	72,518
Other assets	15,021	33,016
Total Assets	2,515,979	2,403,633
Liabilities and Equity
Debt	1,145,691	1,115,981
Accounts payable and accrued expenses	21,599	20,874
Dividends Payable	38,930	35,863
Lease deposit liabilities	22,475	21,325
Total Liabilities	1,228,695	1,194,043
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.01 par value; 60,000,000 shares authorized; 40,978,934 and 39,847,860 shares issued and outstanding, respectively	410	398
Capital in excess of par value	1,254,780	1,173,588
Cumulative net income in excess of dividends	35,173	29,873
Accumulated other comprehensive income	(3,079)	5,731
Total Equity	1,287,284	1,209,590
Total Liabilities and Equity	$ 2,515,979	$ 2,403,633

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	40,978,934	39,847,860
Common stock, shares outstanding	40,978,934	39,847,860

XML

Consolidated Statements Of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenues:
Rental income	$ 63,137	$ 55,074
Interest income from mortgage and other notes	3,089	3,160
Investment income and other	162	784
Revenues	66,388	59,018
Expenses:
Depreciation	16,154	13,733
Interest, including amortization of debt discount and issuance costs	11,661	10,262
Legal	56	126
Franchise, excise and other taxes	267	283
General and administrative	4,108	2,929
Total operating expenses	32,246	27,333
Income before equity-method investee, TRS tax benefit, investment and other gains and noncontrolling interest	34,142	31,685
Loss from equity-method investee	0	(402)
Income tax benefit attributable to taxable REIT subsidiary	0	(161)
Investment and other gains	10,088	1,665
Net income	44,230	33,109
Less: net income attributable to noncontrolling interest	0	(384)
Net income attributable to common stockholders	$ 44,230	$ 32,725
Weighted average common shares outstanding:
Basic	39,953,804	38,401,647
Diluted	40,108,762	38,414,791
Basic:
Net income per common share attributable to common stockholders	$ 1.11	$ 0.85
Diluted:
Net income per common share attributable to common stockholders	$ 1.10	$ 0.85

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 44,230	$ 33,109
Other comprehensive income (loss):
Change in unrealized gains on securities	(26)	2,825
Reclassification for amounts recognized in investment and other gains	10,038	0
Increase (decrease) in fair value of cash flow hedge	(465)	5,480
Less: reclassification adjustment for amounts recognized in net income	789	1,013
Total other comprehensive income (loss)	(8,810)	(1,642)
Comprehensive income	35,420	31,467
Less: comprehensive income attributable to noncontrolling interest	0	(384)
Comprehensive income attributable to common stockholders	$ 35,420	$ 31,083

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 44,230	$ 33,109
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	16,154	13,733
Amortization	1,337	885
Straight-line rental income	(5,755)	(5,286)
Non-cash interest income on construction loan	(271)	(150)
Gain on sale of real estate	(50)	(1,654)
Gain on sale of marketable securities	(10,038)	(11)
Share-based compensation	1,523	979
Amortization of commitment fees	(104)	(68)
Loss from equity-method investee	0	402
Change in operating assets and liabilities:
Other assets	(657)	110
Accounts payable and accrued expenses	2,306	(752)
Net cash provided by operating activities	48,675	41,297
Cash flows from investing activities:
Investment in mortgage and other notes receivable	(28,338)	(20,774)
Collection of mortgage and other notes receivable	12,109	3,985
Investment in real estate	(118,011)	(9,463)
Investment in real estate development	(3,842)	(7,640)
Investment in renovations of existing real estate	(994)	(453)
Proceeds from disposition of real estate properties	450	3,000
Proceeds from sales of marketable securities	18,182	17,049
Net cash used in investing activities	(120,444)	(14,296)
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities	29,000	22,000
Payments on term loans	(196)	(189)
Value of shares withheld from options exercised for employee tax withholding	(116)	(218)
Proceeds from issuance of common shares, net	79,797	0
Distributions to noncontrolling interest	0	(435)
Dividends paid to stockholders	(35,863)	(32,637)
Net cash provided by (used in) financing activities	72,622	(11,479)
(Decrease) increase in cash and cash equivalents	853	15,522
Cash and cash equivalents, beginning of year	4,832	13,286
Cash and cash equivalents, end of year	5,685	28,808
Supplemental disclosure of cash flow information:
Interest Paid	9,164	7,678
Supplemental schedule of non-cash investing and financing activities:
Accounts payable related to investments in real estate	824	450
Tenant investment in leased asset	$ 1,250	$ 0

XML

Consolidated Statement Of Equity - 3 months ended Mar. 31, 2017 - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Cumulative Dividends In Excess Of Net Income [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance, shares at Dec. 31, 2016	39,847,860	39,847,860
Balance, value at Dec. 31, 2016	$ 1,209,590	$ 398	$ 1,173,588	$ 29,873	$ 5,731
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss) Attributable to Parent	44,230			44,230	(8,810)
Comprehensive income	35,420
Stock Issued During Period, Shares, New Issues		1,123,184
Stock Issued During Period, Value, New Issues	79,797	$ 12	79,785
Shares issued on stock options exercised, shares		7,890
Adjustments Related to Tax Withholding for Share-based Compensation	(116)		(116)
Share-based compensation	1,523		1,523
Dividends declared, $1.54 per share	$ (38,930)			(38,930)
Balance, shares at Mar. 31, 2017	40,978,934	40,978,934
Balance, value at Mar. 31, 2017	$ 1,287,284	$ 410	$ 1,254,780	$ 35,173	$ (3,079)

XML

Consolidated Statement Of Equity Consolidated Statement of Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Statement of Stockholders' Equity [Abstract]
Common Stock, Dividends, Per Share, Declared	$ 0.95	$ 0.90

XML

Significant Accounting Policies

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Significant Accounting Policies

SIGNIFICANT ACCOUNTING POLICIES

We, the management of National Health Investors, Inc., (“NHI” or the “Company”) believe that the unaudited condensed consolidated financial statements of which these notes are an integral part include all normal, recurring adjustments that are necessary to fairly present the condensed consolidated financial position, results of operations and cash flows of NHI in all material respects. The Condensed Consolidated Balance Sheet at December 31, 2016 has been derived from the audited consolidated financial statements at that date. We assume that users of these condensed consolidated financial statements have read or have access to the audited December 31, 2016 consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate those contained in our most recent Annual Report on Form 10-K for the year ended December 31, 2016 have been omitted. This condensed consolidated financial information is not necessarily indicative of the results that may be expected for a full year for a variety of reasons including, but not limited to, acquisitions and dispositions, changes in interest rates, rents and the timing of debt and equity financings. For a better understanding of NHI and its condensed consolidated financial statements, we recommend reading these condensed consolidated financial statements in conjunction with the audited consolidated financial statements for the year ended December 31, 2016, which are included in our 2016 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, a copy of which is available at our web site: www.nhireit.com.

Principles of Consolidation - The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, joint ventures, partnerships and consolidated variable interest entities (“VIE”) where NHI controls the operating activities of the VIE, if any. All intercompany transactions and balances have been eliminated in consolidation. Net income is reduced by the portion of net income attributable to noncontrolling interests.

A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.

We apply Financial Accounting Standards Board (“FASB”) guidance for our arrangements with VIEs which requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of the VIE. In accordance with FASB guidance, management must evaluate each of the Company’s contractual relationships which creates a variable interest in other entities. If the Company has a variable interest and the entity is a VIE, then management must determine whether or not the Company is the primary beneficiary of the VIE. If it is determined that the Company is the primary beneficiary, NHI consolidates the VIE. We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.

At March 31, 2017, we held an interest in eight unconsolidated VIEs and, because we generally lack either directly or through related parties any material input in the activities that most significantly impact their economic performance, we have concluded that NHI is not the primary beneficiary. Accordingly, we account for our transactions with these entities and their subsidiaries at amortized cost.

Our VIEs are summarized below by date of initial involvement. For further discussion of the nature of the relationships, including the sources of our exposure to these VIEs, see the notes to our condensed consolidated financial statements cross-referenced below.

Date	Name	Classification	Carrying Amount		Maximum Exposure to Loss		Sources of Exposure
2012	Bickford Senior Living	Notes and straight-line receivable	$	10,509,000	$	32,881,000	Notes 2, 3
2012	Sycamore Street	N/A	$	—	$	1,930,000	Note 3
2014	Senior Living Communities	Notes and straight-line receivable	$	35,013,000	$	46,864,000	Note 3
2014	Life Care Services affiliate	Notes receivable	$	75,469,000	$	84,573,000	Note 3
2015	East Lake Capital Mgmt.	Straight-line receivable	$	2,058,000	$	2,058,000	Note 2
2016	The Ensign Group developer	N/A	$	—	$	—	Note 2
2016	Senior Living Management	Notes and straight-line receivable	$	25,693,000	$	25,804,000	Note 3
2017	Ravn Senior Solutions	Straight-line receivable	$	30,000	$	30,000	Note 2

We are not obligated to provide support beyond our stated commitments to these tenants and borrowers whom we classify as VIEs, and accordingly our maximum exposure to loss as a result of these relationships is limited to the amount of our commitments, as shown above and discussed in the notes. When the above relationships involve leases, some additional exposure to economic loss is present and unquantifiable beyond that tabulated above, where we quantify potential accounting loss for those assets in which NHI has some basis. Generally, additional economic loss on a lease, if any, would be limited to that resulting from a short period of arrearage and non-payment of monthly rent before we are able to take effective remedial action, as well as costs incurred in transitioning the lease. The potential extent of such loss will be dependent upon individual facts and circumstances, cannot be quantified, and is therefore not included in the tabulation above. Typically, the only carrying amounts involving our leases are accumulated straight-line receivables.

We apply FASB guidance related to investments in joint ventures based on the type of controlling rights held by the members’ interests in limited liability companies that may preclude consolidation by the majority equity owner in certain circumstances in which the majority equity owner would otherwise consolidate the joint venture.

We have structured our joint ventures to be compliant with the provisions of the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA") which permits NHI to receive rent payments through a triple-net lease between a property company and an operating company and allows NHI the opportunity to capture additional value on the improving performance of the operating company through distributions to a taxable REIT subsidiary (“TRS”). Accordingly, through September 30, 2016, our TRS held NHI’s equity interest in an unconsolidated operating company, which we did not control, thus providing an organizational structure that allowed the TRS to engage in a broad range of activities and share in revenues that were otherwise non-qualifying income under the REIT gross income tests.

Equity-Method Investment - Through September 30, 2016, we reported our TRS’ investment in an unconsolidated entity, over whose operating and financial policies we had the ability to exercise significant influence but not control, under the equity method of accounting. Under this accounting method, our pro rata share of the entity’s earnings or losses was included in our Condensed Consolidated Statements of Income. Additionally, we adjusted our investment carrying amount to reflect our share of changes in the equity-method investee’s capital resulting from its capital transactions.

Noncontrolling Interest - We have excluded net income attributable to the noncontrolling interest from net income attributable to common shareholders in our Condensed Consolidated Statement of Income for the three months ended March 31, 2016. As of and for the three months ended March 31, 2017, we did not hold any noncontrolling interests.

Reclassifications - We have reclassified certain balances where necessary to conform the presentation of prior periods to the current period. We have combined our investment in marketable securities into other assets in our Condensed Consolidated Balance Sheets.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Earnings Per Share - The weighted average number of common shares outstanding during the reporting period is used to calculate basic earnings per common share. Diluted earnings per common share assume the exercise of stock options using the treasury stock method, to the extent dilutive. Diluted earnings per share also incorporate the potential dilutive impact of our 3.25% convertible senior notes due 2021. We apply the treasury stock method to our convertible debt instruments, the effect of which is that conversion will not be assumed for purposes of computing diluted earnings per share unless the average share price for the period exceeds the conversion price per share.

New Accounting Pronouncements - For a review of recent accounting pronouncements pertinent to our operations and management’s judgment as to the impact that the eventual adoption of these pronouncements will have on our financial position and results of operation, see Note 11.

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Real Estate

3 Months Ended

Mar. 31, 2017

Real Estate [Abstract]

Real Estate Disclosure [Text Block]

REAL ESTATE

As of March 31, 2017, we owned 206 health care real estate properties located in 32 states and consisting of 133 senior housing communities, 68 skilled nursing facilities, 3 hospitals and 2 medical office buildings. Our senior housing properties include assisted living facilities, senior living campuses, independent living facilities, and entrance-fee communities. These investments (excluding our corporate office of $1,267,000) consisted of properties with an original cost of approximately $2,596,057,000, rented under triple-net leases to 29 lessees.

During the three months endedMarch 31, 2017, we made investments related to real estate as described below (dollars in thousands):

Operator	Properties	Asset Class	Amount
The LaSalle Group	5	SHO	$	61,865
Prestige Care	1	SHO	26,200
Ravn Senior Solutions	2	SHO	16,100
The Ensign Group	1	SNF	15,096
			$	119,261

Ravn Senior Solutions

On February 21, 2017, we acquired two assisted living/memory-care facilities totaling 86 units in Hendersonville, North Carolina, for $16,100,000 in cash, inclusive of $100,000 in closing costs and the funding of $207,000 in specified capital improvements. We leased the facilities to Ravn Senior Solutions (“RSS”) for an initial lease term of 15 years plus renewal options. The initial annual lease rate is 7.35%, subject to fixed annual escalators.

In addition, we have committed to RSS certain earnout payments contingent on reaching and maintaining certain performance metrics. As earned, the earnout payments, totaling $1,500,000, would be due in installments of up to $1,000,000 for performance measured as of December 31, 2018, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the periods ending December 31, 2019 and/or 2020. Upon funding, contingent payments earned will be added to the lease base. The acquisition was accounted for as an asset purchase.

RSS’s relationship to NHI consists of its leasehold interests and purchase options and is considered a variable interest, analogous to a financing arrangement. RSS is structured to limit liability for potential damage claims, is capitalized for that purpose and is considered a VIE. Additionally, the master lease conveys to NHI an option to purchase a third facility currently operated by RSS.

Prestige

On March 10, 2017, we acquired a 102-unit assisted living community in Portland, Oregon for $26,200,000, inclusive of closing costs of $112,000. We leased the facility to Prestige Care (“Prestige”) under our existing master lease, which has a remaining lease term of 12 years plus renewal options. The lease provides for an initial annual lease rate of 7% plus annual escalators of 3.5% in years two through four and 2.5% thereafter. The acquisition was accounted for as an asset purchase.

In addition, we have committed to Prestige certain earnout payments contingent on reaching and maintaining specified performance metrics. If earned, the earnout payments, totaling $1,000,000, would be due in installments of up to $1,000,000 for performance measured as of December 31, 2017, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the period ending December 31, 2018. Upon funding, contingent payments earned will be added to the lease base.

The LaSalle Group

On March 16, 2017, we acquired five memory care communities totaling 223 units in Texas and Illinois for $61,800,000 in cash plus closing costs of $65,000. We leased the facility to The LaSalle Group (“LaSalle”) for an initial lease term of 15 years. The lease provides for an initial annual lease rate of 7% plus annual escalators of 3.5% in years two through three and 2.5% thereafter.

In addition, we have committed to LaSalle certain earnout payments contingent on reaching and maintaining certain performance metrics. As earned, the earnout payments, totaling $5,000,000, would be due in installments of up to $2,500,000 for performance measured as of December 31, 2018, with any subsequently earned cumulative unpaid amounts to be measured and due as earned for the trailing periods ending December 31, 2019 and/or 2020. Upon funding, contingent payments earned will be added to the lease base. Because the facility was owner-occupied, the acquisition was accounted for as an asset purchase.

The Ensign Group

On March 24, 2017, we acquired from a developer a 126-bed skilled nursing facility in New Braunfels, Texas for a cash investment of $13,846,000 plus $1,250,000 contributed by the lessee, The Ensign Group (“Ensign”). The facility will be included under our existing master lease for the remaining lease term of 14 years plus renewal options. The initial lease rate is set at 8.35% subject to annual escalators based on prevailing inflation rates. The acquisition was accounted for as an asset purchase.

With the acquisition of the New Braunfels property, NHI has a continuing commitment to purchase, from the developer, three new skilled nursing facilities in Texas for $42,000,000 which are under construction and, upon completion, are to be leased to Legend Healthcare and subleased to Ensign. The fixed-price nature of the commitment creates a variable interest for NHI in the developer, whom NHI considers to lack sufficient equity to finance its operations without recourse to additional subordinated debt. The presence of these conditions causes the developer to be considered a VIE.

Significant Customers

Bickford

As of March 31, 2017, our Bickford Senior Living (“Bickford”) lease portfolio consists of 42 facilities, two of which are under construction and expected to open in the second and third quarters of 2017. Newly-constructed facilities have an annual lease rate of 9% at completion, after six months of free rent. NHI has a right to future Bickford acquisitions, development projects and refinancing transactions. Of these facilities, 35 were operated as a joint venture until September 30, 2016, when NHI and Sycamore, an affiliate of Bickford , entered into a definitive agreement terminating the joint venture and converting Bickford’s participation to a triple-net tenancy with assumption of existing leases and terms. Through September 30, 2016, NHI owned an 85% equity interest and Sycamore owned a 15% equity interest in our consolidated subsidiary (“PropCo”). The facilities were leased to an operating company (“OpCo”), in which NHI previously held a non-controlling 85% ownership interest. The facilities are managed by Bickford. Our joint venture was structured to comply with the provisions of RIDEA.

Of our total revenues, $9,373,000 (14%) and $6,307,000 (11%) were recognized as rental income from Bickford for the three months endedMarch 31, 2017 and 2016, including $910,000 and $(64,000) in straight-line rent income (expense), respectively.

Holiday

As of March 31, 2017, we leased 25 independent living facilities to an affiliate of Holiday Retirement (“Holiday”). The master lease term of 17 years began in December 2013 and provides for an escalator of 4.5% in 2017 and a minimum of 3.5% each year thereafter.

Of our total revenues, $10,954,000 (17%) and $10,954,000 (19%) were derived from Holiday for the three months endedMarch 31, 2017 and 2016, including $1,849,000 and $2,241,000 in straight-line rent, respectively. Our tenant operates the facilities pursuant to a management agreement with a Holiday-affiliated manager.

NHC

As of March 31, 2017, we leased 42 facilities under two master leases to National HealthCare Corporation (“NHC”), a publicly-held company and the lessee of our legacy properties. The facilities leased to NHC consist of 3 independent living facilities and 39 skilled nursing facilities (4 of which are subleased to other parties for whom the lease payments are guaranteed to us by NHC). These facilities are leased to NHC under the terms of an amended master lease agreement originally dated October 17, 1991 (“the 1991 lease”) which includes our 35 remaining legacy properties and a master lease agreement dated August 30, 2013 (“the 2013 lease”) which includes 7 skilled nursing facilities acquired from a third party.

The 1991 lease has been amended to extend the lease expiration to December 31, 2026. There are two additional 5-year renewal options, each at fair rental value of such leased property as negotiated between the parties and determined without including the value attributable to any improvements to the leased property voluntarily made by NHC at its expense. Under the terms of the lease, the base annual rental is $30,750,000 and rent escalates by 4% of the increase, if any, in each facility’s revenue over a 2007 base year. The 2013 lease provides for a base annual rental of $3,450,000 and has a lease expiration of August 2028. Under the terms of the 2013 lease, rent escalates 4% of the increase, if any, in each facility’s revenue over the 2014 base year. For both the 1991 lease and the 2013 lease, we refer to this additional rent component as “percentage rent.” During the last three years of the 2013 lease, NHC will have the option to purchase the facilities for $49,000,000.

The following table summarizes the percentage rent income from NHC (in thousands):

	Three Months Ended
	March 31,
	2017		2016
Current year	$	782	$	733
Prior year final certification1	194		547
Total percentage rent income	$	976	$	1,280

¹ For purposes of the percentage rent calculation described in the master lease Agreement, NHC’s annual revenue by facility for a given year is certified to NHI by March 31st of the following year.

Of our total revenues, $9,513,000 (14%) and $9,817,000 (17%) were derived from NHC for the three months endedMarch 31, 2017 and 2016, respectively.

The chairman of our board of directors is also a director on NHC’s board of directors. As of March 31, 2017, NHC owned 1,630,462 shares of our common stock.

Senior Living Communities

As of March 31, 2017, we now lease nine retirement communities totaling 1,970 units to Senior Living Communities, LLC (“Senior Living”). The 15-year master lease, which began in December 2014, contains two5-year renewal options and provides for an annual escalator of 4% in 2018 and 3% thereafter.

Of our total revenue, $11,431,000 (17%) and $9,855,000 (17%) in lease revenues were derived from Senior Living for the three months endedMarch 31, 2017 and 2016, including $1,746,000 and $1,795,000, respectively, in straight-line rent.

Disposition of Assets

On March 22, 2016, we sold a skilled nursing facility in Idaho for cash consideration of $3,000,000. The carrying value of the facility was $1,346,000, and we recorded a gain of $1,654,000. For the three months endedMarch 31, 2016, lease income from the property was $73,000.

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Mortgage And Other Notes Receivable

3 Months Ended

Mar. 31, 2017

Financing Receivable, Net [Abstract]

Mortgage Notes Receivable

MORTGAGE AND OTHER NOTES RECEIVABLE

At March 31, 2017, we had net investments in mortgage notes receivable with a net carrying value of $102,662,000, secured by real estate and UCC liens on the personal property of 9 facilities, and other notes receivable with a carrying value of $47,436,000, guaranteed by significant parties to the notes or by cross-collateralization of properties with the same owner. No allowance for doubtful accounts was considered necessary at March 31, 2017 or December 31, 2016.

Bickford

At March 31, 2017, our construction loans to Bickford are summarized as follows:

	Rate	Maturity	Commitment		Drawn		Location
July 2016	9%	5 years	$	14,000,000	(3,724,000	)	Illinois
January 2017	9%	5 years	14,000,000		(1,905,000	)	Michigan
			$	28,000,000	(5,629,000	)

The promissory notes are secured by first mortgage liens on substantially all real and personal property as well as a pledge of any and all leases or agreements which may grant a right of use to the subject property. Usual and customary covenants extend to the agreements, including the borrower’s obligation for payment of insurance and taxes. NHI has a purchase option on the properties at stabilization, whereby annual rent will be set with a floor of 9.55%, based on NHI’s total investment, plus fixed annual escalators.

Our loans to Bickford represent a variable interest as do our leases, which are considered to be analogous to financing arrangements. Bickford is structured to limit liability for potential claims for damages, is capitalized to achieve that purpose and is considered a VIE.

Timber Ridge

In February 2015, we entered into an agreement to lend up to $154,500,000 to LCS-Westminster Partnership III LLP (“LCS-WP”), an affiliate of Life Care Services (“LCS”) . The loan agreement conveys a mortgage interest and facilitated the construction of Phase II of Timber Ridge at Talus (“Timber Ridge”), a Type-A Continuing Care Retirement Community in Issaquah, WA managed by LCS. Our loan to LCS-WP represents a variable interest. As an affiliate of a larger company, LCS-WP is structured to limit liability for potential damage claims, is capitalized to achieve that purpose and is considered a VIE.

The loan takes the form of two notes under a master credit agreement. The senior note (“Note A”) totals $60,000,000 at a 6.75% interest rate with 10 basis-point escalators after year three, and has a term of 10 years. We have funded $51,871,000 of Note A as of March 31, 2017. Note A is interest-only and is locked to prepayment for three years. After year three, the prepayment penalty starts at 5% and declines 1% per year. The second note (“Note B”) is a construction loan for up to $94,500,000 at an annual interest rate of 8% and a five-year maturity and was fully drawn during 2016. We began receiving repayment with new resident entrance fees upon the opening of Phase II during the fourth quarter of 2016. Repayment of Note B amounted to $69,927,000 as of March 31, 2017, plus an additional $2,549,000 through May 1, 2017.

NHI has a purchase option on the entire Timber Ridge property for the greater of fair market value or $115,000,000 during a purchase option window of 120 days that will contingently open in year five or upon earlier stabilization of the development, as defined.

Senior Living Communities

In connection with the acquisition in December 2014 of the properties leased to Senior Living, we provided a $15,000,000 revolving line of credit, the maturity of which mirrors the 15-year term of the master lease. Borrowings are used to finance construction projects within the Senior Living portfolio, including building additional units. Up to $5,000,000 of the facility may be used to meet general working capital needs. Amounts outstanding under the facility, $3,261,000 at March 31, 2017, bear interest at an annual rate equal to the prevailing 10-year U.S. Treasury rate, 2.40% at March 31, 2017, plus 6%.

In March 2016, we extended two mezzanine loans of up to $12,000,000 and $2,000,000, respectively, to affiliates of Senior Living, to partially fund construction of a 186-unit senior living campus on Daniel Island in South Carolina. The loans bear interest payable monthly at a 10% annual rate and mature in March 2021. The loans are fully drawn at March 31, 2017, and provide NHI with a purchase option on the development upon its meeting certain operational metrics. The option is to remain open during the term of the loans, plus any extensions.

Our loans to Senior Living and its subsidiaries represent a variable interest as does our lease, which is considered to be analogous to a financing arrangement. Senior Living is structured to limit liability for potential claims for damages, is appropriately capitalized for that purpose and is considered a VIE.

Senior Living Management

On August 3, 2016, we entered into an agreement to furnish to our current tenant, Senior Living Management, Inc. (“SLM”), through its affiliates, loans of up to $24,500,000 to facilitate SLM’s acquisition of five senior housing facilities that it currently operates. The loans consist of two notes under a master credit agreement, include both a mortgage and a corporate loan, and bear interest at 8.25% with terms of five years, plus optional one and two-year extensions. NHI has a right of first refusal if SLM elects to sell the facilities. The loans were fully funded as of March 31, 2017.

Our loans to SLM represent a variable interest as do our leases, which are analogous to financing arrangements. SLM is structured to limit liability for potential damage claims, is capitalized for that purpose and is considered a VIE.

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Other Assets

3 Months Ended

Mar. 31, 2017

Other Assets [Abstract]

Other Assets Disclosure [Text Block]

OTHER ASSETS

Other assets consist of the following (in thousands):

	March 31, 2017		December 31, 2016
Accounts receivable and other assets	2,703		9,017
Regulatory deposits	8,208		8,208
Reserves for replacement, insurance and tax escrows	4,110		4,046
Marketable securities (Note 7)	—		11,745
	$	15,021	$	33,016

Reserves for replacement and tax escrows include amounts required to be held on deposit in accordance with regulatory agreements governing our Fannie Mae and HUD mortgages.

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Debt

3 Months Ended

Mar. 31, 2017

Debt Instruments [Abstract]

Debt Disclosure

DEBT

Debt consists of the following (in thousands):

	March 31, 2017			December 31, 2016
Convertible senior notes - unsecured (net of discount of $4,423 and $4,717)	$	195,577		$	195,283
Revolving credit facility - unsecured	187,000			158,000
Bank term loans - unsecured	250,000			250,000
Private placement term loans - unsecured	400,000			400,000
HUD mortgage loans (net of discount of $1,466 and $1,487)	44,179			44,354
Fannie Mae term loans - secured, non-recourse	78,084			78,084
Unamortized loan costs	(9,149		)	(9,740		)
	$	1,145,691		$	1,115,981

Aggregate principal maturities of debt as of March 31, 2017 for each of the next five years and thereafter are as follows (in thousands):

Twelve months ended March 31,
2018	$	801
2019	828
2020	856
2021	437,885
2022	200,916
Thereafter	519,443
	1,160,729
Less: discount	(5,889		)
Less: unamortized loan costs	(9,149		)
	$	1,145,691

As amended in June 2015, our $800,000,000 senior unsecured credit facility with a group of banks provides for: (1) revolving credit of $550,000,000 maturing in June 2020 (inclusive of an embedded 1-year extension option) with interest at 150 basis points over LIBOR (98 bps at March 31, 2017); (2) an existing $130,000,000 term loan that matures in June 2020 with interest at 175 basis points over LIBOR; and (3) two existing term loans which remain in place totaling $120,000,000, maturing in June 2020 and bearing interest at 175 basis points over LIBOR. The employment of interest rate swaps for our fixed term debt leaves only our revolving credit facility exposed to variable rate risk. Our swaps and the financial instruments to which they relate are described in the table below, under the caption “Interest Rate Swap Agreements.”

At March 31, 2017, we had $363,000,000 available to draw on the revolving portion of the credit facility. The unused commitment fee is 40 basis points per annum. The unsecured credit facility agreement requires that we maintain certain financial ratios within limits set by our creditors. To date, these ratios, which are calculated quarterly, have been within the limits required by the credit facility agreements.

Pinnacle Bank is a participating member of our banking group. A member of NHI’s board of directors and chairman of our audit committee is also the chairman of Pinnacle Financial Partners, Inc., the holding company for Pinnacle Bank. NHI's local banking transactions are conducted primarily through Pinnacle Bank.

Our unsecured private placement term loans are summarized below:

Amount		Inception	Maturity	Fixed Rate
$	125,000,000	January 2015	January 2023	3.99%
50,000,000		November 2015	November 2023	3.99%
75,000,000		September 2016	September 2024	3.93%
50,000,000		November 2015	November 2025	4.33%
100,000,000		January 2015	January 2027	4.51%
$	400,000,000

Terms and conditions of above term loans are similar to those under our bank credit facility with the exception of provisions regarding prepayment premiums.

In March 2015 we obtained $78,084,000 in Fannie Mae financing. The term debt financing consists of interest-only payments at an annual rate of 3.79% and a 10-year maturity. The mortgages are non-recourse and secured by thirteen properties leased to Bickford. Proceeds were used to reduce borrowings on NHI’s unsecured bank credit facility. The notes are secured by facilities having a net book value of $110,252,000 at March 31, 2017, that were previously pledged as security on Fannie Mae term debt retired in December 2014.

In March 2014 we issued $200,000,000 of 3.25% senior unsecured convertible notes due April 2021 (the “Notes”). Interest is payable April 1st and October 1st of each year. As adjusted for terms of the indenture, the Notes are convertible at a conversion rate of 14.13 shares of common stock per $1,000 principal amount, representing a conversion price of approximately $70.75 per share for a total of approximately 2,826,680 underlying shares. The conversion rate is subject to adjustment upon the occurrence of certain events, as defined in the indenture governing the Notes, but will not be adjusted for any accrued and unpaid interest except in limited circumstances. The conversion option is considered an “optional net-share settlement conversion feature,” meaning that upon conversion, NHI’s conversion obligation may be satisfied, at our option, in cash, shares of common stock or a combination of cash and shares of common stock. Because we have the ability and intent to settle the convertible securities in cash upon exercise, we use the treasury stock method to account for potential dilution. For the three months ended March 31, 2017, dilution resulting from the conversion option within our convertible debt is 98,048 shares. If NHI’s current share price increases above the adjusted $70.75 conversion price, further dilution will be attributable to the conversion feature. On March 31, 2017, the value of the convertible debt, computed as if the debt were immediately eligible for conversion, exceeded its face amount by $5,302,000.

The embedded conversion options (1) do not require net cash settlement, (2) are not conventionally convertible but can be classified in stockholders’ equity under ASC 815-40, and (3) are considered indexed to NHI’s own stock. Therefore, the conversion feature satisfies the conditions to qualify for an exception to the derivative liability rules, and the Notes are split into debt and equity components. The value of the debt component is based upon the estimated fair value of a similar debt instrument without the conversion feature at the time of issuance and was estimated to be approximately $192,238,000. The $7,762,000 difference between the contractual principal on the debt and the value allocated to the debt was recorded as the equity component and represents the estimated value of the conversion feature of the instrument. The excess of the contractual principal amount of the debt over its estimated fair value, the original issue discount, is amortized to interest expense using the effective interest method over the estimated term of the Notes. The effective interest rate used to amortize the debt discount and the liability component of the debt issue costs was approximately 3.9% based on our estimated non-convertible borrowing rate at the date the Notes were issued.

The total cost of issuing the Notes was $6,063,000, $275,000 of which was allocated to the equity component and $5,788,000 of which was allocated to the debt component and subject to amortization over the estimated term of the notes. The remaining unamortized balance at March 31, 2017, was $3,003,000.

Our HUD mortgage loans are secured by ten properties leased to Bickford and having a net book value of $53,882,000 at March 31, 2017. Nine mortgage notes require monthly payments of principal and interest from 4.3% to 4.4% (inclusive of mortgage insurance premium) and mature in August and October 2049. One additional HUD mortgage loan assumed in 2014 requires monthly payments of principal and interest of 2.9% (inclusive of mortgage insurance premium) and matures in October 2047. The loan has an outstanding principal balance of $9,063,000 and a net book value of $7,598,000, which approximates fair value.

The following table summarizes interest expense (in thousands):

	Three Months Ended
	March 31,
	2017			2016
Interest expense at contractual rates	$	10,822		$	9,515
Capitalized interest	(67		)	(121		)
Amortization of debt issuance costs and debt discount	906			868
Total interest expense	$	11,661		$	10,262

Interest Rate Swap Agreements

To mitigate our exposure to interest rate risk, we have entered into the following interest rate swap contracts on our bank term loans as of March 31, 2017 (dollars in thousands):

Date Entered	Maturity Date	Fixed Rate	Rate Index	Notional Amount		Fair Value
May 2012	April 2019	3.29%	1-month LIBOR	$	40,000	$	(43	)
June 2013	June 2020	3.86%	1-month LIBOR	$	80,000	$	(1,061	)
March 2014	June 2020	3.91%	1-month LIBOR	$	130,000	$	(1,919	)

See Note 10 for fair value disclosures about our variable and fixed rate debt and interest rate swap agreements.

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Commitments And Contingencies

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES

In the normal course of business, we enter into a variety of commitments, typical of which are those for the funding of revolving credit arrangements, construction and mezzanine loans to our operators to conduct expansions and acquisitions for their own account, and commitments for the funding of construction for expansion or renovation to our existing properties under lease. In our leasing operations we offer to our tenants and to sellers of newly-acquired properties a variety of inducements which originate contractually as contingencies but which may become commitments upon the satisfaction of the contingent event. Contingent payments earned will be included in the respective lease bases when funded. The tables below summarize our existing, known commitments and contingencies according to the nature of their impact on our leasehold or loan portfolios.

	Asset Class	Type	Total		Funded			Remaining
Loan Commitments:
Life Care Services Note A	SHO	Construction	$	60,000,000	$	(51,871,000	)	$	8,129,000
Bickford Senior Living	SHO	Construction	28,000,000		(5,629,000		)	22,371,000
Senior Living Communities	SHO	Revolving Credit	29,000,000		(17,261,000		)	11,739,000
			$	117,000,000	$	(74,761,000	)	$	42,239,000

See Note 3 for full details of our loan commitments. As provided above, loans funded do not include the effects of discounts or commitment fees. We expect to fully fund the Life Care Services Note A during 2017. Funding of the promissory note commitments to Bickford is expected to transpire monthly throughout 2017.

	Asset Class	Type	Total		Funded			Remaining
Development Commitments:
Legend/The Ensign Group	SNF	Purchase	$	56,000,000	$	(14,000,000	)	$	42,000,000
Bickford Senior Living	SHO	Construction	56,500,000		(53,676,000		)	2,824,000
Chancellor Health Care	SHO	Construction	650,000		(52,000		)	598,000
East Lake/Watermark Retirement	SHO	Renovation	10,000,000		(4,016,000		)	5,984,000
Santé Partners	SHO	Renovation	3,500,000		(2,621,000		)	879,000
Bickford Senior Living	SHO	Renovation	2,400,000		—			2,400,000
East Lake Capital Management	SHO	Renovation	400,000		—			400,000
Woodland Village	SHO	Renovation	350,000		(227,000		)	123,000
			$	129,800,000	$	(74,592,000	)	$	55,208,000

We remain obligated to purchase, from a developer, three new skilled nursing facilities in Texas for $42,000,000 which are leased to Legend and subleased to Ensign. The three facilities are under construction by the developer.

We are committed to develop five senior housing facilities in Illinois and Virginia managed and leased by Bickford, each consisting of 60 private-pay assisted living and memory care units. Total costs funded includes land and development costs incurred on the project as of March 31, 2017. One facility opened in July 2016, two opened in October 2016, one opened in April 2017 and one is planned to open in the third quarter of 2017.

	Asset Class	Type	Total		Funded		Remaining
Contingencies:
East Lake Capital Management	SHO	Lease Inducement	$	8,000,000	$	—	$	8,000,000
Sycamore Street (Bickford affiliate)	SHO	Letter-of-credit	1,930,000		—		1,930,000
Ravn Senior Solutions	SHO	Earnout	1,500,000		—		1,500,000
Prestige Care	SHO	Earnout	1,000,000		—		1,000,000
The LaSalle Group	SHO	Earnout	5,000,000		—		5,000,000
			$	17,430,000	$	—	$	17,430,000

See Note 2 for a description of earnouts contingently payable to RSS, LaSalle and Prestige.

In connection with our July 2015 lease to East Lake of three senior housing properties, NHI has committed to certain lease inducement payments of $8,000,000 contingent on reaching and maintaining certain metrics, which have been assessed as not probable of payment and which we have not recorded on our balance sheet as of March 31, 2017. We are unaware of circumstances that would change our initial assessment as to the contingent lease incentives. Not included in the above table is a seller earnout of $750,000, which is recorded on our balance sheet within accounts payable and accrued expenses.

In February 2014 we entered into a commitment on a letter of credit for the benefit of Sycamore, an affiliate of Bickford, which previously held a minority interest in PropCo (see Note 2). At March 31, 2017, our commitment on the letter of credit totaled $1,930,000. As of March 31, 2017, our direct support of Sycamore is limited to our guarantee on the letter of credit established for their benefit. Sycamore, as an affiliate company of Bickford, is structured to limit liability for potential claims for damages, is capitalized to achieve that purpose and is considered a VIE.

Litigation

Our facilities are subject to claims and suits in the ordinary course of business. Our lessees and borrowers have indemnified, and are obligated to continue to indemnify us, against all liabilities arising from the operation of the facilities, and are further obligated to indemnify us against environmental or title problems affecting the real estate underlying such facilities. While there may be lawsuits pending against certain of the owners and/or lessees of the facilities, management believes that the ultimate resolution of all such pending proceedings will have no material adverse effect on our financial condition, results of operations or cash flows.

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Investment And Other Gains

3 Months Ended

Mar. 31, 2017

Investment And Other Gains [Abstract]

Investment And Other Gains

INVESTMENT AND OTHER GAINS

The following table summarizes our investment and other gains (in thousands):

	Three Months Ended
	March 31,
	2017		2016
Gains on sales of real estate	$	50	$	1,654
Gains on sales of marketable securities	10,038		11
	$	10,088	$	1,665

In January and February 2017, we recognized gains of $10,038,000 on sales totaling $11,718,000 of marketable securities with a carrying value of $11,745,000 and an adjusted cost of $1,680,000 at December 31, 2016. Total proceeds of $18,182,000 from marketable securities include settlements occurring in 2017 of $6,464,000 that resulted from sales in December 2016.

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Share-Based Compensation

3 Months Ended

Mar. 31, 2017

Deferred Compensation Arrangements [Abstract]

Share-Based Compensation

SHARE-BASED COMPENSATION

We recognize share-based compensation for all stock options granted over the requisite service period using the fair value of these grants as estimated at the date of grant using the Black-Scholes pricing model, and all restricted stock granted over the requisite service period using the market value of our publicly-traded common stock on the date of grant.

Share-Based Compensation Plans

The Compensation Committee of the Board of Directors (“the Committee”) has the authority to select the participants to be granted options; to designate whether the option granted is an incentive stock option (“ISO”), a non-qualified option, or a stock appreciation right; to establish the number of shares of common stock that may be issued upon exercise of the option; to establish the vesting provision for any award; and to establish the term any award may be outstanding. The exercise price of any ISO’s granted will not be less than 100% of the fair market value of the shares of common stock on the date granted, and the term of an ISO may not be more than ten years. The exercise price of any non-qualified options granted will not be less than 100% of the fair market value of the shares of common stock on the date granted unless so determined by the Committee.

In May 2012, our stockholders approved the 2012 Stock Incentive Plan (“the 2012 Plan”) pursuant to which 1,500,000 shares of our common stock were made available to grant as share-based payments to employees, officers, directors or consultants. Through a vote of our shareholders on May 7, 2015, we increased the maximum number of shares under the plan from 1,500,000 shares to 3,000,000 shares; increased the automatic annual grant to non-employee directors from 15,000 shares to 20,000 shares; and limited the Company’s ability to re-issue shares under the Plan. As of March 31, 2017, there were 961,668 shares available for future grants under the 2012 Plan. The individual restricted stock and option grant awards vest over periods up to five years. The term of the options under the 2012 Plan is up to ten years from the date of grant.

In May 2005, our stockholders approved the NHI 2005 Stock Option Plan (“the 2005 Plan”) pursuant to which 1,500,000 shares of our common stock were made available to grant as share-based payments to employees, officers, directors or consultants. As of March 31, 2017, the 2005 Plan has expired and no additional shares may be granted under the 2005 Plan. The individual restricted stock and option grant awards vest over periods up to ten years. The term of the options outstanding under the 2005 Plan is up to ten years from the date of grant.

Compensation expense is recognized only for the awards that ultimately vest. Accordingly, forfeitures that were not expected will result in the reversal of previously recorded compensation expense. The compensation expense reported for the three months endedMarch 31, 2017 and 2016 was $1,523,000 and $979,000, respectively, and is included in general and administrative expense in the Condensed Consolidated Statements of Income.

At March 31, 2017, we had, net of expected forfeitures, $1,644,000 of unrecognized compensation cost related to unvested stock options which is expected to be expensed over the following periods: 2017 - $1,027,000, 2018 - $552,000 and 2019 - $65,000. Stock-based compensation is included in general and administrative expense in the Condensed Consolidated Statements of Income.

The weighted average fair value per share of options granted was $5.75 and $3.65 for 2017 and 2016, respectively. The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2017	2016
Dividend yield	5.3%	6.2%
Expected volatility	19.7%	19.1%
Expected lives	3.3 years	2.9 years
Risk-free interest rate	1.49%	0.91%

The following table summarizes our outstanding stock options:

	Three Months Ended
	March 31,
	2017		2016
Options outstanding January 1,	541,679		741,676
Options granted under 2012 Plan	485,000		470,000
Options exercised under 2012 Plan	(25,833	)	(126,666	)
Options forfeited under 2012 Plan	(6,668	)	—
Options exercised under 2005 Plan	(15,000	)	—
Options outstanding, March 31,	979,178		1,085,010
Exercisable at March 31,	585,827		731,662

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Earnings and Dividends Per Share

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS AND DIVIDENDS PER COMMON SHARE

The weighted average number of common shares outstanding during the reporting period is used to calculate basic earnings per common share. Diluted earnings per common share assume the exercise of stock options and the conversion of our convertible debt using the treasury stock method, to the extent dilutive. If our average stock price for the period increases over the conversion price of our convertible debt, the conversion feature will be considered dilutive.

The following table summarizes the average number of common shares and the net income used in the calculation of basic and diluted earnings per common share (in thousands, except share and per share amounts):

	Three Months Ended
	March 31,
	2017		2016
Net income attributable to common stockholders	$	44,230	$	32,725
BASIC:
Weighted average common shares outstanding	39,953,804		38,401,647
DILUTED:
Weighted average common shares outstanding	39,953,804		38,401,647
Stock options	56,910		13,144
Convertible subordinated debentures	98,048		—
Average dilutive common shares outstanding	40,108,762		38,414,791
Net income per common share - basic	$	1.11	$	.85
Net income per common share - diluted	$	1.10	$	.85
Incremental shares excluded since anti-dilutive:
Net share effect of stock options with an exercise price in excess of the average market price for our common shares	19,851		75,050
Regular dividends declared per common share	$	.95	$	.90

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Fair Value Of Financial Instruments

3 Months Ended

Mar. 31, 2017

Fair Value Of Financial Instruments [Abstract]

Fair Value Disclosures [Text Block]

FAIR VALUE OF FINANCIAL INSTRUMENTS

Our financial assets and liabilities measured at fair value (based on the hierarchy of the three levels of inputs described in Note 1 to the consolidated financial statements contained in our most recent Annual Report on Form 10-K) on a recurring basis have included marketable securities, derivative financial instruments and contingent consideration arrangements. Marketable securities have consisted of common stock of other healthcare REITs. Derivative financial instruments include our interest rate swap agreements. Contingent consideration arrangements relate to certain provisions of recent real estate purchase agreements involving both business combinations.

Marketable securities. We utilize quoted prices in active markets to measure debt and equity securities; these items are classified as Level 1 in the hierarchy and include the common stock of other publicly held healthcare REITs.

Derivative financial instruments. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy.

Contingent consideration. Contingent consideration arrangements are classified as Level 3 and are valued using unobservable inputs about the nature of the contingent arrangement and the counter-party to the arrangement, as well as our assumptions about the probability of full settlement of the contingency.

Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):

		Fair Value Measurement
	Balance Sheet Classification	March 31, 2017		December 31, 2016
Level 1
Common stock of other healthcare REITs	Other assets	$	—	$	11,745
Level 2
Interest rate swap liability	Accounts payable and accrued expenses	$	3,022	$	4,279

Carrying values and fair values of financial instruments that are not carried at fair value at March 31, 2017 and December 31, 2016 in the Condensed Consolidated Balance Sheets are as follows (in thousands):

	Carrying Amount				Fair Value Measurement
	2017		2016		2017		2016
Level 2
Variable rate debt	$	434,109	$	404,828	$	437,000	$	408,000
Fixed rate debt	$	711,582	$	711,153	$	708,158	$	706,332
Level 3
Mortgage and other notes receivable	$	150,098	$	133,493	$	148,434	$	133,229

The fair value of mortgage and other notes receivable is based on credit risk and discount rates that are not observable in the marketplace and therefore represents a Level 3 measurement.

Fixed rate debt. Fixed rate debt is classified as Level 2 and its value is based on quoted prices for similar instruments or calculated utilizing model derived valuations in which significant inputs are observable in active markets.

Carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short-term nature. The fair value of our borrowings under our revolving credit facility are reasonably estimated at their carrying value at March 31, 2017 and December 31, 2016, due to the predominance of floating interest rates, which generally reflect market conditions.

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Recent Accounting Pronouncements Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2017

Recent Accounting Pronouncements [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014 the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 provides a principles-based approach for a broad range of revenue generating transactions, including the sale of real estate, which will generally require more estimates and more judgment and more disclosures than under current guidance. Because this ASU specifically excludes lease contracts from its scope, its application is not expected to impact our recognition of rental income on a straight-line basis. In August 2015 the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is now effective for public entities for annual periods beginning after December 15, 2017, including interim periods therein. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company plans on adopting this standard using the full retrospective adoption method on January 1, 2018. The Company’s revenue-producing contracts are primarily leases that are not within the scope of this standard. As a result, the Company does not expect the adoption of this standard to have a material impact on the timing and measurement of the Company’s rental income. The Company is continuing to evaluate the impact on other revenue sources.

In February 2016 the FASB issued ASU 2016-02, Leases. Public companies will be required to apply ASU 2016-02 for all accounting periods beginning after December 15, 2018 - for REITs this means application will be required beginning January 1, 2019. Early adoption is permitted. All leases with lease terms greater than one year are subject to ASU 2016-02 , including leases in place as of the adoption date. Management expects that, because of the ASU 2016-02’s emphasis on lessee accounting, ASU 2016-02 will not have a material impact on our accounting for leases. Consistent with present standards, NHI will continue to account for lease revenue on a straight-line basis for most leases. Also consistent with NHI’s current practice, under ASU 2016-02 only initial direct costs that are incremental to the lessor will be capitalized.

In June 2016 the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 will require more timely recognition of credit losses associated with financial assets. While current GAAP includes multiple credit impairment objectives for instruments, the previous objectives generally delayed recognition of the full amount of credit losses until the loss was probable of occurring. The amendments in ASU 2016-13, whose scope is asset-based and not restricted to financial institutions, are an improvement to existing standards in eliminating the probable initial recognition threshold in current GAAP and, instead, reflect an entity’s current estimate of all expected credit losses. Previously, when credit losses were measured under GAAP we generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU 2016-13 broaden the information that we must consider in developing our expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss that will be more useful to users of the financial statements. ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Because we are likely to continue to invest in loans and generate receivables, adoption of ASU 2016-13 in 2020 will have some effect on our accounting for these investments, though the nature of those effects will depend on the composition of our loan portfolio at that time; accordingly, we are evaluating the extent of the effects, if any, that adopting the provisions of ASU 2016-13 in 2020 will have on NHI.

In January 2017 the FASB issued ASU 2017-01, Clarifying the Definition of a Business. ASU 2017-01 will narrow the definition of a business in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business-inputs, processes, and outputs. Currently the definition of outputs contributes to broad interpretations of the definition of a business. Additionally, the Standard provides that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. For purposes of this test, land and buildings can be combined along with the intangible assets for any in-place leases. For most of NHI’s acquisitions of investment property, this screen would be met and, therefore, not meet the definition of a business. ASU 2017-01 is effective for public entities for fiscal years beginning after December 15, 2017, including interim periods. Early application of this standard is generally allowed for acquisitions acquired after the standard was issued but before the acquisition has been reflected in financial statements. We adopted the provisions of ASU 2017-01 in the first quarter of 2017. The adoption of ASU 2017-01 did not have a material effect on our consolidated financial statements.

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Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2017

Policy Text Block [Abstract]

Consolidation, Policy

Principles of Consolidation - The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, joint ventures, partnerships and consolidated variable interest entities (“VIE”) where NHI controls the operating activities of the VIE, if any. All intercompany transactions and balances have been eliminated in consolidation. Net income is reduced by the portion of net income attributable to noncontrolling interests.

A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.

We apply Financial Accounting Standards Board (“FASB”) guidance for our arrangements with VIEs which requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of the VIE. In accordance with FASB guidance, management must evaluate each of the Company’s contractual relationships which creates a variable interest in other entities. If the Company has a variable interest and the entity is a VIE, then management must determine whether or not the Company is the primary beneficiary of the VIE. If it is determined that the Company is the primary beneficiary, NHI consolidates the VIE. We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.

At March 31, 2017, we held an interest in eight unconsolidated VIEs and, because we generally lack either directly or through related parties any material input in the activities that most significantly impact their economic performance, we have concluded that NHI is not the primary beneficiary. Accordingly, we account for our transactions with these entities and their subsidiaries at amortized cost.

Our VIEs are summarized below by date of initial involvement. For further discussion of the nature of the relationships, including the sources of our exposure to these VIEs, see the notes to our condensed consolidated financial statements cross-referenced below.

Date	Name	Classification	Carrying Amount		Maximum Exposure to Loss		Sources of Exposure
2012	Bickford Senior Living	Notes and straight-line receivable	$	10,509,000	$	32,881,000	Notes 2, 3
2012	Sycamore Street	N/A	$	—	$	1,930,000	Note 3
2014	Senior Living Communities	Notes and straight-line receivable	$	35,013,000	$	46,864,000	Note 3
2014	Life Care Services affiliate	Notes receivable	$	75,469,000	$	84,573,000	Note 3
2015	East Lake Capital Mgmt.	Straight-line receivable	$	2,058,000	$	2,058,000	Note 2
2016	The Ensign Group developer	N/A	$	—	$	—	Note 2
2016	Senior Living Management	Notes and straight-line receivable	$	25,693,000	$	25,804,000	Note 3
2017	Ravn Senior Solutions	Straight-line receivable	$	30,000	$	30,000	Note 2

We are not obligated to provide support beyond our stated commitments to these tenants and borrowers whom we classify as VIEs, and accordingly our maximum exposure to loss as a result of these relationships is limited to the amount of our commitments, as shown above and discussed in the notes. When the above relationships involve leases, some additional exposure to economic loss is present and unquantifiable beyond that tabulated above, where we quantify potential accounting loss for those assets in which NHI has some basis. Generally, additional economic loss on a lease, if any, would be limited to that resulting from a short period of arrearage and non-payment of monthly rent before we are able to take effective remedial action, as well as costs incurred in transitioning the lease. The potential extent of such loss will be dependent upon individual facts and circumstances, cannot be quantified, and is therefore not included in the tabulation above. Typically, the only carrying amounts involving our leases are accumulated straight-line receivables.

We apply FASB guidance related to investments in joint ventures based on the type of controlling rights held by the members’ interests in limited liability companies that may preclude consolidation by the majority equity owner in certain circumstances in which the majority equity owner would otherwise consolidate the joint venture.

We have structured our joint ventures to be compliant with the provisions of the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA") which permits NHI to receive rent payments through a triple-net lease between a property company and an operating company and allows NHI the opportunity to capture additional value on the improving performance of the operating company through distributions to a taxable REIT subsidiary (“TRS”). Accordingly, through September 30, 2016, our TRS held NHI’s equity interest in an unconsolidated operating company, which we did not control, thus providing an organizational structure that allowed the TRS to engage in a broad range of activities and share in revenues that were otherwise non-qualifying income under the REIT gross income tests.

Equity-Method Investment - Through September 30, 2016, we reported our TRS’ investment in an unconsolidated entity, over whose operating and financial policies we had the ability to exercise significant influence but not control, under the equity method of accounting. Under this accounting method, our pro rata share of the entity’s earnings or losses was included in our Condensed Consolidated Statements of Income. Additionally, we adjusted our investment carrying amount to reflect our share of changes in the equity-method investee’s capital resulting from its capital transactions.

Noncontrolling Interest - We have excluded net income attributable to the noncontrolling interest from net income attributable to common shareholders in our Condensed Consolidated Statement of Income for the three months ended March 31, 2016. As of and for the three months ended March 31, 2017, we did not hold any noncontrolling interests.

Reclassification, Policy

Reclassifications - We have reclassified certain balances where necessary to conform the presentation of prior periods to the current period. We have combined our investment in marketable securities into other assets in our Condensed Consolidated Balance Sheets.

Use of Estimates, Policy

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Earnings Per Share, Policy

Earnings Per Share - The weighted average number of common shares outstanding during the reporting period is used to calculate basic earnings per common share. Diluted earnings per common share assume the exercise of stock options using the treasury stock method, to the extent dilutive. Diluted earnings per share also incorporate the potential dilutive impact of our 3.25% convertible senior notes due 2021. We apply the treasury stock method to our convertible debt instruments, the effect of which is that conversion will not be assumed for purposes of computing diluted earnings per share unless the average share price for the period exceeds the conversion price per share.

New Accounting Pronouncements, Policy

New Accounting Pronouncements - For a review of recent accounting pronouncements pertinent to our operations and management’s judgment as to the impact that the eventual adoption of these pronouncements will have on our financial position and results of operation, see Note 11.

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Significant Accounting Policies Significant Accounting Policies (Schedule of Variable Interest Entities) (Tables)

3 Months Ended

Mar. 31, 2017

Schedule of Variable Interest Entities [Abstract]

Schedule of Variable Interest Entities [Table Text Block]

Date	Name	Classification	Carrying Amount		Maximum Exposure to Loss		Sources of Exposure
2012	Bickford Senior Living	Notes and straight-line receivable	$	10,509,000	$	32,881,000	Notes 2, 3
2012	Sycamore Street	N/A	$	—	$	1,930,000	Note 3
2014	Senior Living Communities	Notes and straight-line receivable	$	35,013,000	$	46,864,000	Note 3
2014	Life Care Services affiliate	Notes receivable	$	75,469,000	$	84,573,000	Note 3
2015	East Lake Capital Mgmt.	Straight-line receivable	$	2,058,000	$	2,058,000	Note 2
2016	The Ensign Group developer	N/A	$	—	$	—	Note 2
2016	Senior Living Management	Notes and straight-line receivable	$	25,693,000	$	25,804,000	Note 3
2017	Ravn Senior Solutions	Straight-line receivable	$	30,000	$	30,000	Note 2

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Real Estate (Tables)

3 Months Ended

Mar. 31, 2017

Real Estate [Abstract]

New Real Estate Investments [Table Text Block]

During the three months endedMarch 31, 2017, we made investments related to real estate as described below (dollars in thousands):

Operator	Properties	Asset Class	Amount
The LaSalle Group	5	SHO	$	61,865
Prestige Care	1	SHO	26,200
Ravn Senior Solutions	2	SHO	16,100
The Ensign Group	1	SNF	15,096
			$	119,261

Summary of NHC Percentage Rent [Table Text Block]

The following table summarizes the percentage rent income from NHC (in thousands):

	Three Months Ended
	March 31,
	2017		2016
Current year	$	782	$	733
Prior year final certification1	194		547
Total percentage rent income	$	976	$	1,280

¹ For purposes of the percentage rent calculation described in the master lease Agreement, NHC’s annual revenue by facility for a given year is certified to NHI by March 31st of the following year.

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Mortgage And Other Notes Receivable Mortgage and Other Notes Receivable (Schedule of Bickford Construction Loans) (Tables)

3 Months Ended

Mar. 31, 2017

Bickford Senior Living [Member]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

At March 31, 2017, our construction loans to Bickford are summarized as follows:

	Rate	Maturity	Commitment		Drawn		Location
July 2016	9%	5 years	$	14,000,000	(3,724,000	)	Illinois
January 2017	9%	5 years	14,000,000		(1,905,000	)	Michigan
			$	28,000,000	(5,629,000	)

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Other Assets (Tables)

3 Months Ended

Mar. 31, 2017

Other Assets [Abstract]

Schedule of Other Assets [Table Text Block]

Other assets consist of the following (in thousands):

	March 31, 2017		December 31, 2016
Accounts receivable and other assets	2,703		9,017
Regulatory deposits	8,208		8,208
Reserves for replacement, insurance and tax escrows	4,110		4,046
Marketable securities (Note 7)	—		11,745
	$	15,021	$	33,016

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Debt (Tables)

3 Months Ended

Mar. 31, 2017

Debt Instruments [Abstract]

Schedule of Debt

Debt consists of the following (in thousands):

	March 31, 2017			December 31, 2016
Convertible senior notes - unsecured (net of discount of $4,423 and $4,717)	$	195,577		$	195,283
Revolving credit facility - unsecured	187,000			158,000
Bank term loans - unsecured	250,000			250,000
Private placement term loans - unsecured	400,000			400,000
HUD mortgage loans (net of discount of $1,466 and $1,487)	44,179			44,354
Fannie Mae term loans - secured, non-recourse	78,084			78,084
Unamortized loan costs	(9,149		)	(9,740		)
	$	1,145,691		$	1,115,981

Schedule of Maturities of Long-term Debt

Aggregate principal maturities of debt as of March 31, 2017 for each of the next five years and thereafter are as follows (in thousands):

Twelve months ended March 31,
2018	$	801
2019	828
2020	856
2021	437,885
2022	200,916
Thereafter	519,443
	1,160,729
Less: discount	(5,889		)
Less: unamortized loan costs	(9,149		)
	$	1,145,691

Schedule of Unsecured Term Loans

Our unsecured private placement term loans are summarized below:

Amount		Inception	Maturity	Fixed Rate
$	125,000,000	January 2015	January 2023	3.99%
50,000,000		November 2015	November 2023	3.99%
75,000,000		September 2016	September 2024	3.93%
50,000,000		November 2015	November 2025	4.33%
100,000,000		January 2015	January 2027	4.51%
$	400,000,000

Schedule of Interest Expense

The following table summarizes interest expense (in thousands):

	Three Months Ended
	March 31,
	2017			2016
Interest expense at contractual rates	$	10,822		$	9,515
Capitalized interest	(67		)	(121		)
Amortization of debt issuance costs and debt discount	906			868
Total interest expense	$	11,661		$	10,262

Schedule of Interest Rate Derivatives

March 31, 2017 (dollars in thousands):

Date Entered	Maturity Date	Fixed Rate	Rate Index	Notional Amount		Fair Value
May 2012	April 2019	3.29%	1-month LIBOR	$	40,000	$	(43	)
June 2013	June 2020	3.86%	1-month LIBOR	$	80,000	$	(1,061	)
March 2014	June 2020	3.91%	1-month LIBOR	$	130,000	$	(1,919	)

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Commitments And Contingencies Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies (Tables) [Abstract]

Schedule of Loan Commitments [Table Text Block]

	Asset Class	Type	Total		Funded			Remaining
Loan Commitments:
Life Care Services Note A	SHO	Construction	$	60,000,000	$	(51,871,000	)	$	8,129,000
Bickford Senior Living	SHO	Construction	28,000,000		(5,629,000		)	22,371,000
Senior Living Communities	SHO	Revolving Credit	29,000,000		(17,261,000		)	11,739,000
			$	117,000,000	$	(74,761,000	)	$	42,239,000

Schedule of Lease Commitments [Table Text Block]

	Asset Class	Type	Total		Funded			Remaining
Development Commitments:
Legend/The Ensign Group	SNF	Purchase	$	56,000,000	$	(14,000,000	)	$	42,000,000
Bickford Senior Living	SHO	Construction	56,500,000		(53,676,000		)	2,824,000
Chancellor Health Care	SHO	Construction	650,000		(52,000		)	598,000
East Lake/Watermark Retirement	SHO	Renovation	10,000,000		(4,016,000		)	5,984,000
Santé Partners	SHO	Renovation	3,500,000		(2,621,000		)	879,000
Bickford Senior Living	SHO	Renovation	2,400,000		—			2,400,000
East Lake Capital Management	SHO	Renovation	400,000		—			400,000
Woodland Village	SHO	Renovation	350,000		(227,000		)	123,000
			$	129,800,000	$	(74,592,000	)	$	55,208,000

Schedule of Loss Contingencies [Table Text Block]

	Asset Class	Type	Total		Funded		Remaining
Contingencies:
East Lake Capital Management	SHO	Lease Inducement	$	8,000,000	$	—	$	8,000,000
Sycamore Street (Bickford affiliate)	SHO	Letter-of-credit	1,930,000		—		1,930,000
Ravn Senior Solutions	SHO	Earnout	1,500,000		—		1,500,000
Prestige Care	SHO	Earnout	1,000,000		—		1,000,000
The LaSalle Group	SHO	Earnout	5,000,000		—		5,000,000
			$	17,430,000	$	—	$	17,430,000

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Investment And Other Gains (Tables)

3 Months Ended

Mar. 31, 2017

Investment And Other Gains [Abstract]

Schedule of Investment And Other Gains

The following table summarizes our investment and other gains (in thousands):

	Three Months Ended
	March 31,
	2017		2016
Gains on sales of real estate	$	50	$	1,654
Gains on sales of marketable securities	10,038		11
	$	10,088	$	1,665

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Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2017

Deferred Compensation Arrangements [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2017	2016
Dividend yield	5.3%	6.2%
Expected volatility	19.7%	19.1%
Expected lives	3.3 years	2.9 years
Risk-free interest rate	1.49%	0.91%

Schedule of Stock Option Activity

The following table summarizes our outstanding stock options:

	Three Months Ended
	March 31,
	2017		2016
Options outstanding January 1,	541,679		741,676
Options granted under 2012 Plan	485,000		470,000
Options exercised under 2012 Plan	(25,833	)	(126,666	)
Options forfeited under 2012 Plan	(6,668	)	—
Options exercised under 2005 Plan	(15,000	)	—
Options outstanding, March 31,	979,178		1,085,010
Exercisable at March 31,	585,827		731,662

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Earnings and Dividends Per Share (Tables)

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table summarizes the average number of common shares and the net income used in the calculation of basic and diluted earnings per common share (in thousands, except share and per share amounts):

	Three Months Ended
	March 31,
	2017		2016
Net income attributable to common stockholders	$	44,230	$	32,725
BASIC:
Weighted average common shares outstanding	39,953,804		38,401,647
DILUTED:
Weighted average common shares outstanding	39,953,804		38,401,647
Stock options	56,910		13,144
Convertible subordinated debentures	98,048		—
Average dilutive common shares outstanding	40,108,762		38,414,791
Net income per common share - basic	$	1.11	$	.85
Net income per common share - diluted	$	1.10	$	.85
Incremental shares excluded since anti-dilutive:
Net share effect of stock options with an exercise price in excess of the average market price for our common shares	19,851		75,050
Regular dividends declared per common share	$	.95	$	.90

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Fair Value Of Financial Instruments Fair Value Of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value Of Financial Instruments [Abstract]

Schedule of Assets and Liabilities Measured on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):

		Fair Value Measurement
	Balance Sheet Classification	March 31, 2017		December 31, 2016
Level 1
Common stock of other healthcare REITs	Other assets	$	—	$	11,745
Level 2
Interest rate swap liability	Accounts payable and accrued expenses	$	3,022	$	4,279

Fair Value Measurements, Nonrecurring [Table Text Block]

Carrying values and fair values of financial instruments that are not carried at fair value at March 31, 2017 and December 31, 2016 in the Condensed Consolidated Balance Sheets are as follows (in thousands):

	Carrying Amount				Fair Value Measurement
	2017		2016		2017		2016
Level 2
Variable rate debt	$	434,109	$	404,828	$	437,000	$	408,000
Fixed rate debt	$	711,582	$	711,153	$	708,158	$	706,332
Level 3
Mortgage and other notes receivable	$	150,098	$	133,493	$	148,434	$	133,229

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Significant Accounting Policies Significant Accounting Policies (Details)	Mar. 31, 2017
Variable Interest Entity Number Of Entities Not Primary Beneficiary	8
Debt Instrument, Name, Convertible Senior Notes [Member]
Debt Instrument, Interest Rate, Stated Percentage	3.25%

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Significant Accounting Policies Significant Accounting Policies (Schedule of Variable Interest Entities) (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Sycamore Street [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets	$ 0
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	1,930
Ensign Group [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets	0
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	0
Straight-Line Rent Receivable [Member] | Bickford Senior Living [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets	10,509
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	32,881
Straight-Line Rent Receivable [Member] | Senior Living Communities [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets	35,013
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	46,864
Straight-Line Rent Receivable [Member] | East Lake Capital [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets	2,058
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	2,058
Straight-Line Rent Receivable [Member] | Senior Living Management [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets	25,693
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	25,804
Straight-Line Rent Receivable [Member] | Ravn Senior Solutions [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets	30
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	30
Notes Receivable [Member] | Life Care Services [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets	75,469
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	$ 84,573

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Real Estate Real Estate (New Real Estate Investments) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) properties
Real Estate Investments During The Period	$ 119,261
The Lasalle Group [Member]
Real Estate Properties, Number Acquired | properties	5
Real Estate Investments During The Period	$ 61,865
Prestige Senior Living [Member]
Real Estate Properties, Number Acquired | properties	1
Real Estate Investments During The Period	$ 26,200
Ravn Senior Solutions [Member]
Real Estate Properties, Number Acquired | properties	2
Real Estate Investments During The Period	$ 16,100
Ensign Group [Member]
Real Estate Properties, Number Acquired | properties	1
Real Estate Investments During The Period	$ 15,096

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Real Estate (Summary of NHC Percentage Rent) (Details) - National Healthcare Corporation [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Total percentage rent	$ 976	$ 1,280
Current year [Member]
Total percentage rent	782	733
Prior year final certification [Member]
Total percentage rent	$ 194	$ 547

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Real Estate (Narrative) (Details)	3 Months Ended
	Mar. 31, 2017 USD ($) properties Master_Leases renewalOptions beds_or_units shares	Mar. 31, 2016 USD ($) beds_or_units	Sep. 30, 2016 properties
Number of Real Estate Properties | properties	206
Number of States in which Entity Operates	32
Nonportfolio Assets, Original Cost	$ 1,267,000
Real Estate Investment Property, Portfolio Assets	$ 2,596,057,000
Number of Lessees	29
Payments to Acquire Real Estate	$ 118,011,000	$ 9,463,000
Lessee Payment To Acquire Purchase Option	1,250,000	0
Remaining Unfunded Development Commitment	55,208,000
Operating Leases, Income Statement, Lease Revenue	63,137,000	55,074,000
Straight Line Rent	5,755,000	5,286,000
Gain on sale of real estate	$ 50,000	$ 1,654,000
Bickford Development Properties [Member]
Number of Units in Real Estate Property | beds_or_units		60
Ravn Senior Solutions [Member]
Real Estate Properties, Number Acquired | properties	2
Number of Units in Real Estate Property | beds_or_units	86
Payments to Acquire Real Estate	$ 16,100,000
Asset Purchase Transaction Costs	$ 100,000
Lessor Leasing Arrangements, Operating Leases, Term of Contract	15 years
Initial lease rate	7.35%
Capital Improvements Commitment	$ 207,000
Lease Incentive Commitment Assessed As Not Probable	1,500,000
Payments to acquire real estate, seller earnout, contingent, not probable	$ 1,000,000
Holiday Acquisition Holdings [Member]
Number of Real Estate Properties | properties	25
Lessor Leasing Arrangements, Operating Leases, Term of Contract	17 years
Lease Escalator Rate, From Lease Year 1 to Lease Year 3	4.50%
Lease Escalator Rate, After Lease Year 3	3.50%
Operating Leases, Income Statement, Lease Revenue	$ 10,954,000	$ 10,954,000
Percentage of Continuing Revenue	17.00%	19.00%
Straight Line Rent	$ 1,849,000	$ 2,241,000
National Healthcare Corporation [Member]
Number of Real Estate Properties | properties	42
Number of Master Leases | Master_Leases	2
Operating Leases, Income Statement, Lease Revenue	$ 9,513,000	$ 9,817,000
Percentage of Continuing Revenue	14.00%	17.00%
Lessor Equity Shares Owned, Significant Lessee | shares	1,630,462
Percentage rent	$ 976,000	$ 1,280,000
National Healthcare Corporation [Member] | NHC - 1991 Lease [Member]
Number of Real Estate Properties | properties	35
Number Of Additional Lease Renewal Options | renewalOptions	2
Lease Renewal Period In Years	5 years
Percentage Rent Rate	0.04
Minimum Annual Lease Income	$ 30,750,000
National Healthcare Corporation [Member] | NHC - 2013 Lease [Member]
Number Of Real Estate Properties Acquired | properties	7
Percentage Rent Rate	0.04
Minimum Annual Lease Income	$ 3,450,000
Purchase Option Amount	$ 49,000,000
Bickford Senior Living [Member]
Number of Real Estate Properties | properties	42
Operating Leases, Income Statement, Lease Revenue	$ 9,373,000	$ 6,307,000
Percentage of Continuing Revenue	14.00%	11.00%
Number of Real Estate Properties To Be Constructed | properties	2
Straight Line Rent	$ 910,000	$ (64,000)
Joint Venture Contributed Properties Ownership Interest Retained			85.00%
Joint Venture Contributed Properties Ownership Interest Surrendered			15.00%
Bickford Senior Living [Member] | Bickford Development Properties [Member]
Initial lease rate	9.00%
Free Rent Lease Period, Number of Months	6 months
Bickford Senior Living [Member] | Bickford RIDEA Properties [Member]
Number of Real Estate Properties | properties			35
Senior Living Communities [Member]
Number of Units in Real Estate Property	1,970
Lessor Leasing Arrangements, Operating Leases, Term of Contract	15 years
Lease Escalator Rate Lease Year 2 to Lease Year 4	4.00%
Lease Escalator Rate after Lease Year 4	3.00%
Operating Leases, Income Statement, Lease Revenue	$ 11,431,000	$ 9,855,000
Percentage of Continuing Revenue	17.00%	17.00%
Straight Line Rent	$ 1,746,000	$ 1,795,000
Number Of Additional Lease Renewal Options	2
Lease Renewal Period In Years	5 years
Prestige Senior Living [Member]
Real Estate Properties, Number Acquired | properties	1
Number of Units in Real Estate Property | beds_or_units	102
Payments to Acquire Real Estate	$ 26,200,000
Asset Purchase Transaction Costs	$ 112,000
Lessor Leasing Arrangements, Operating Leases, Term of Contract	12 years
Initial lease rate	7.00%
Lease Escalator Rate Lease Year 2 to Lease Year 4	3.50%
Lease Escalator Rate after Lease Year 4	2.50%
Lease Incentive Commitment Assessed As Not Probable	$ 1,000,000
Payments to acquire real estate, seller earnout, contingent, not probable	$ 1,000,000
The Lasalle Group [Member]
Real Estate Properties, Number Acquired | properties	5
Number of Units in Real Estate Property | beds_or_units	223
Payments to Acquire Real Estate	$ 61,800,000
Asset Purchase Transaction Costs	$ 65,000
Lessor Leasing Arrangements, Operating Leases, Term of Contract	15 years
Initial lease rate	7.00%
Lease Escalator Rate, From Lease Year 1 to Lease Year 3	3.50%
Lease Escalator Rate, After Lease Year 3	2.50%
Lease Incentive Commitment Assessed As Not Probable	$ 5,000,000
Payments to acquire real estate, seller earnout, contingent, not probable	$ 2,500,000
Ensign Group [Member]
Real Estate Properties, Number Acquired | properties	1
Number of Units in Real Estate Property | beds_or_units	126
Payments to Acquire Real Estate	$ 13,846,000
Lessee Payment To Acquire Purchase Option	$ 1,250,000
Lessor Leasing Arrangements, Operating Leases, Term of Contract	14 years
Initial lease rate	8.35%
Real Estate Properties, Commitment To Purchase | properties	3
Senior Housing Community [Member]
Number of Real Estate Properties | properties	133
Skilled Nursing Facility [Member]
Number of Real Estate Properties | properties	68
Skilled Nursing Facility [Member] | National Healthcare Corporation [Member]
Number of Real Estate Properties | properties	39
Skilled Nursing Facility [Member] | National Healthcare Corporation [Member] | Subleased Facilities [Member]
Number of Real Estate Properties | properties	4
Hospital [Member]
Number of Real Estate Properties | properties	3
Medical Office Building [Member]
Number of Real Estate Properties | properties	2
Independent Living Facility [Member] | National Healthcare Corporation [Member]
Number of Real Estate Properties | properties	3
Grangeville, ID [Member]
Operating Leases, Income Statement, Lease Revenue	$ 73,000
Gain on sale of real estate	1,654,000
Real Estate Held-for-sale	1,346,000
Asset Held For Sale, Agreed Selling Price	$ 3,000,000

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Mortgage And Other Notes Receivable (Details)	1 Months Ended	3 Months Ended
	May 01, 2017 USD ($)	Mar. 31, 2017 USD ($) properties beds_or_units	Mar. 31, 2016 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2014 USD ($)
Mortgage and other notes receivable, net		$ 150,098,000		$ 133,493,000
Number of health care properties related to mortgage notes receivables | properties		9
Allowance for Doubtful Accounts Receivable		$ 0			$ 0
Loans and Leases Receivable, Commitments, Fixed Rates		$ 117,000,000
Number of Real Estate Properties | properties		206
Secured By Real Estate [Member]
Mortgage and other notes receivable, net		$ 102,662,000
Not Secured By Real Estate [Member]
Mortgage and other notes receivable, net		47,436,000
Life Care Services [Member]
Mortgage and other notes receivable, net		51,871,000
Loans and Leases Receivable, Commitments, Fixed Rates		60,000,000
Notes Receivable, Total Borrowings, Master Credit Agreement		$ 154,500,000
Notes Receivable, Number Of Loans, Master Credit Agreement		2
Purchase Option, Amount, Minimum		$ 115,000,000
Purchase Option, Period, Months		120 days
Purchase Option, Open Period, Begin, Note Year		5 years
Senior Living Communities [Member]
Mortgage and other notes receivable, net		$ 17,261,000
Loans Receivable, Description of Variable Rate Basis, Reference Rate Maturity		10 years
Loans Receivable, Description of Variable Rate Basis		0.024
Number of Units in Real Estate Property		1,970
Loans and Lease Receivable, Maximum Revolving Amount		$ 15,000,000
Lessor Leasing Arrangements, Operating Leases, Term of Contract		15 years
Revolving Note Receivable, Maximum Amount Available for Working Capital Purposes		$ 5,000,000
Revolving Note Receivable, Amount Outstanding		$ 3,261,000
Loans Receivable, Basis Spread on Variable Rate		6.00%
Number of Term Loans		2
Loans and Leases Receivable, Commitments, Fixed Rates		$ 29,000,000
Bickford Note Investment [Member]
Initial lease rate		9.55%
Mortgage and other notes receivable, net		$ 5,629,000
Loans and Leases Receivable, Commitments, Fixed Rates		28,000,000
Senior Living Management [Member]
Loans and Leases Receivable, Commitments, Fixed Rates		$ 24,500,000
Notes Receivable, Number Of Loans, Master Credit Agreement		2
Loan Term		5 years
Notes Receivable, Interest Rate, Master Credit Agreement		8.25%
Number of Real Estate Properties | properties		5
Notes Receivable, Maturity, Optional Extension, Years		1 year
Note Receivable, Maturity, Second Optional Extension, Years		2 years
Note A [Member] | Life Care Services [Member]
Mortgage and other notes receivable, net		$ 51,871,000
Notes Receivable, Total Borrowings, Master Credit Agreement		$ 60,000,000
Note Receivable, First Note Year For Rate Escalator		3 years
Loan Term		10 years
Note Receivable, Prepayment, Disallowance Period		3 years
Note Receivable, Prepayment Penalty, Rate		5.00%
Note Receivable, Prepayment Penalty, Rate Decrease		1.00%
Notes Receivable, Interest Rate, Master Credit Agreement		6.75%
Loans And Leases Receivable, Commitment, Fixed Rates, Escalator, Basis Points		10
Note A [Member] | Senior Living Communities [Member]
Loans and Leases Receivable, Commitments, Fixed Rates			$ 12,000,000
Note Receivable Interest Rate		10.00%
Note B [Member] | Life Care Services [Member]
Notes Receivable, Total Borrowings, Master Credit Agreement		$ 94,500,000
Loan Term		5 years
Mortgage Loans on Real Estate, Collections of Principal		$ (69,927,000)
Notes Receivable, Interest Rate, Master Credit Agreement		8.00%
Note B [Member] | Senior Living Communities [Member]
Loans and Leases Receivable, Commitments, Fixed Rates			$ 2,000,000
Subsequent Event [Member] | Note B [Member] | Life Care Services [Member]
Mortgage Loans on Real Estate, Collections of Principal	$ (2,549,000)

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Mortgage And Other Notes Receivable Mortgage and Other Notes Receivable (Schedule of Bickford Construction Loans) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Loans and Leases Receivable, Commitments, Fixed Rates	$ 117,000,000
Loans and Leases Receivable, Net Amount	(150,098,000)	$ (133,493,000)
Bickford Note Investment [Member]
Loans and Leases Receivable, Commitments, Fixed Rates	28,000,000
Loans and Leases Receivable, Net Amount	$ (5,629,000)
July 2016 [Member] | Bickford Note Investment [Member]
Note Receivable Interest Rate	9.00%
Loan Term	5 years
Loans and Leases Receivable, Commitments, Fixed Rates	$ 14,000,000
Loans and Leases Receivable, Net Amount	$ (3,724,000)
January 2017 [Member] | Bickford Note Investment [Member]
Note Receivable Interest Rate	9.00%
Loan Term	5 years
Loans and Leases Receivable, Commitments, Fixed Rates	$ 14,000,000
Loans and Leases Receivable, Net Amount	$ (1,905,000)

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Other Assets (Schedule of Other Assets) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Equity Method Investments And Other Assets [Abstract]
Accounts receivable and other assets			$ 2,703	$ 9,017
Regulatory deposits			8,208	8,208
Reserves for replacement, insurance and tax escrows			4,110	4,046
Marketable securities			0	11,745
Other Assets	$ 15,021	$ 33,016	$ 15,021	$ 33,016

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Debt (Schedule of Debt) (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2014
Debt Instrument [Line Items]
Revolving credit facility - unsecured	$ 187,000,000	$ 158,000,000
Convertible Debt	195,577,000	195,283,000	$ 192,238,000
Unamortized Debt Issuance Expense	(9,149,000)	(9,740,000)
Debt, Long-term and Short-term, Combined Amount	1,145,691,000	1,115,981,000
Bank Term Loans [Member]
Debt Instrument [Line Items]
Bank term loans - unsecured	250,000,000	250,000,000
Debt Instrument, Name, HUD Mortgages [Member]
Debt Instrument [Line Items]
Secured Debt	44,179,000	44,354,000
Private Placement Term Loans [Member]
Debt Instrument [Line Items]
Bank term loans - unsecured	400,000,000	400,000,000
Debt Instrument, Name, Fannie Mae Term Loans [Member]
Debt Instrument [Line Items]
Secured Debt	$ 78,084,000	$ 78,084,000

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Debt Debt (Schedule of Debt) (Captions) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Debt Instrument, Unamortized Discount	$ 5,889
Debt Instrument, Name, Q3 2014 HUD Mortgages [Member]
Debt Instrument [Line Items]
Debt Instrument, Unamortized Discount	1,466	$ 1,487
Debt Instrument, Name, Convertible Senior Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Unamortized Discount	$ 4,423	$ 4,717

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Debt Debt (Schedule of Maturities of Long-term Debt) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Maturities of Long-term Debt [Abstract]
Long-term Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months	$ 801
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Two	828
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Three	856
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Four	437,885
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Five	200,916
Long-term Debt, Maturities, Repayments of Principal in Rolling after Year Five	519,443
Long-term Debt, Gross	1,160,729
Debt Instrument, Unamortized Discount	(5,889)
Unamortized Debt Issuance Expense	(9,149)	$ (9,740)
Debt, Long-term and Short-term, Combined Amount	$ 1,145,691	$ 1,115,981

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Debt Debt (Schedule of Unsecured Term Loans) (Details) - Private Placement [Member] - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Unsecured Debt	$ 400,000,000	$ 400,000,000
January 2023 [Member]
Unsecured Debt	$ 125,000,000
Debt Instrument, Interest Rate, Stated Percentage	3.99%
November 2023 [Member]
Unsecured Debt	$ 50,000,000
Debt Instrument, Interest Rate, Stated Percentage	3.99%
September 2024 [Member]
Unsecured Debt	$ 75,000,000
Debt Instrument, Interest Rate, Stated Percentage	3.93%
November 2025 [Member]
Unsecured Debt	$ 50,000,000
Debt Instrument, Interest Rate, Stated Percentage	4.33%
January 2027 [Member]
Unsecured Debt	$ 100,000,000
Debt Instrument, Interest Rate, Stated Percentage	4.51%

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Debt (Schedule of Interest Expense) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Schedule of Interest Expense [Abstract]
Interest expense	$ 10,822	$ 9,515
Interest Costs Capitalized	(67)	(121)
Amortization of debt issuance costs, debt discount and premium	906	868
Total interest expense	$ 11,661	$ 10,262

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Debt (Schedule of Interest Rate Derivatives) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Interest Rate Swap, Date Entered, May 2012 [Member]
Derivative [Line Items]
Derivative, Inception Date	May 31, 2012
Derivative, Maturity Date	Apr. 30, 2019
Derivative, Fixed Interest Rate	3.29%
Debt Instrument, Description of Variable Rate Basis	1-month LIBOR
Derivative, Notional Amount	$ 40,000
Interest Rate Cash Flow Hedge Liability at Fair Value	$ (43)
Interest Rate Swap, Date Entered, June 2013 [Member]
Derivative [Line Items]
Derivative, Inception Date	Jun. 30, 2013
Derivative, Maturity Date	Jun. 30, 2020
Derivative, Fixed Interest Rate	3.86%
Debt Instrument, Description of Variable Rate Basis	1-month LIBOR
Derivative, Notional Amount	$ 80,000
Interest Rate Cash Flow Hedge Liability at Fair Value	$ (1,061)
Interest Rate Swap, Date Entered, March 2014 [Member]
Derivative [Line Items]
Derivative, Inception Date	Mar. 31, 2014
Derivative, Maturity Date	Jun. 30, 2020
Derivative, Fixed Interest Rate	3.91%
Debt Instrument, Description of Variable Rate Basis	1-month LIBOR
Derivative, Notional Amount	$ 130,000
Interest Rate Cash Flow Hedge Liability at Fair Value	$ (1,919)

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Debt (Narrative) (Details)	3 Months Ended
	Mar. 31, 2017 USD ($) properties shares number_of_loans $ / shares	Mar. 31, 2016 USD ($) shares	Dec. 31, 2016 USD ($)	Mar. 31, 2014 USD ($)
Noncash or Part Noncash Acquisition, Value of Liabilities Assumed	$ 824,000	$ 450,000
Proceeds from convertible senior notes	200,000,000
Line of Credit Facility, Maximum Borrowing Capacity	$ 800,000,000
Debt Instrument, Convertible, Conversion Ratio	14.13
Convertible Debt Instrument, Conversion Ratio, Principal Amount, Basis	$ 1,000
Debt Instrument, Convertible, Conversion Price | $ / shares	$ 70.75
Debt Instrument, Convertible, If-converted Value in Excess of Principal	$ 5,302,000
Debt Instrument, Convertible, Number of Equity Instruments | shares	2,826,680
Incremental Common Shares Attributable to Dilutive Effect of Conversion of Debt Securities | shares	98,048	0
Convertible Debt	$ 195,577,000		$ 195,283,000	$ 192,238,000
Debt Instrument, Convertible, Carrying Amount of Equity Component				$ 7,762,000
Debt Instrument, Interest Rate, Effective Percentage	3.90%
Unamortized Debt Issuance Expense	$ 9,149,000		$ 9,740,000
Debt Instrument, Variable Interest Rate, Reference Rate, Basis Points	9800.00%
Credit Facility, Current Revolving Borrowing Capacity	$ 550,000,000
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	4000.00%
Number of Real Estate Properties | properties	206
Debt Instrument, Name, Convertible Senior Notes [Member]
Debt Instrument, Interest Rate, Stated Percentage	3.25%
Debt Issuance Cost	$ 6,063,000
Unamortized Debt Issuance Expense	$ 3,003,000
Debt Instrument, Name, Revolving Credit Facility [Member]
Debt Maturity, Extension Option, Number Of Years	1 year
Debt Instrument, Basis Spread on Variable Rate	15000.00%
Unused balance of the unsecured revolving credit facility	$ 363,000,000
Debt Instrument Name, $130m Term Loan - June 2020 Maturity [Member]
Term Loans, Outstanding Balance	$ 130,000,000
Debt Instrument, Basis Spread on Variable Rate	17500.00%
Debt Instrument Name, $120m Term Loans - June 2020 Maturity [Member]
Term Loans, Outstanding Balance	$ 120,000,000
Debt Instrument, Basis Spread on Variable Rate	17500.00%
Number of Term Loans	2
Debt Instrument, Name, Fannie Mae Term Loans [Member]
Debt Instrument, Term	10 years
Mortgage Loans on Real Estate, Face Amount of Mortgages	$ 78,084,000
Debt Instrument, Interest Rate, Stated Percentage	3.79%
Number of Real Estate Properties	13
Net Book Value of Real Estate Pledged Toward Mortgage	$ 110,252,000
Debt Instrument, Name, HUD Mortgages [Member]
Number of Real Estate Properties | properties	10
Net Book Value of Real Estate Pledged Toward Mortgage	$ 53,882,000
Debt Instrument, Name, HUD Mortgages [Member] | Minimum [Member]
Mortgage Loans on Real Estate, Interest Rate	4.30%
Debt Instrument, Name, HUD Mortgages [Member] | Maximum [Member]
Mortgage Loans on Real Estate, Interest Rate	4.40%
Debt Instrument, HUD Mortgages, 2049 Maturity [Member]
Mortgage Loans on Real Estate, Number of Loans | number_of_loans	9
Debt Instrument, HUD Mortgages, 2047 Maturity [Member]
Mortgage Loans on Real Estate, Number of Loans | number_of_loans	1
Allocated to Debt [Member] | Debt Instrument, Name, Convertible Senior Notes [Member]
Debt Issuance Cost	$ 5,788,000
Allocated to Equity [Member] | Debt Instrument, Name, Convertible Senior Notes [Member]
Debt Issuance Cost	$ 275,000
Bickford Senior Living [Member]
Number of Real Estate Properties | properties	42
Middletown, OH [Member] | Bickford Senior Living [Member]
Noncash or Part Noncash Acquisition, Value of Liabilities Assumed	$ 7,598,000
Noncash or Part Noncash Acquisition, Noncash Financial or Equity Instrument Consideration, Rate	2.90%
Noncash or Part Noncash Acquisition, Debt Assumed	$ 9,063,000

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Commitments And Contingencies (Details)	3 Months Ended
	Mar. 31, 2017 USD ($) properties beds_or_units	Mar. 31, 2016 properties beds_or_units
Number of Real Estate Properties	206
Ensign Group [Member]
Real Estate Properties, Commitment To Purchase	3
Construction of transitional rehabilitation center, number of beds | beds_or_units	126
Capital Addition Purchase Commitments [Member] | Ensign Group [Member]
Real Estate Properties, Commitment To Purchase, Amount | $	$ 42,000,000
Asset under Construction [Member] | Ensign Group [Member]
Real Estate Properties, Commitment To Purchase	3
Maximum Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable | $	$ 17,430,000
Maximum Contingent Amount [Member] | East Lake Capital [Member]
Lease Incentive Commitment Assessed As Not Probable | $	$ 8,000,000
East Lake Mgmt, Acquisition [Member]
Number of Real Estate Properties	3
Payments to acquire real estate, seller earnout, contingent, not probable | $	$ 750,000
Bickford Development Properties [Member]
Number Of Development Projects Active		5
Construction of transitional rehabilitation center, number of beds | beds_or_units		60
Bickford Development Properties [Member] | July 2016 [Member]
Number Of Development Projects Active		1
Bickford Development Properties [Member] | October 2016 [Member]
Number Of Development Projects Active		2
Bickford Development Properties [Member] | April 2017 [Member]
Number Of Development Projects Active		1
Bickford Development Properties [Member] | Third Quarter 2017 [Member]
Number Of Development Projects Active		1

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Commitments And Contingencies Commitments and Contingencies (Schedule of Loan Commitments) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Loans and Leases Receivable, Commitments, Fixed Rates	$ 117,000
Loans and Leases Receivable, Net Amount	(150,098)	$ (133,493)
Notes Receivable Funding Commitment	42,239
Life Care Services [Member]
Loans and Leases Receivable, Commitments, Fixed Rates	60,000
Loans and Leases Receivable, Net Amount	(51,871)
Notes Receivable Funding Commitment	8,129
Bickford Senior Living [Member]
Loans and Leases Receivable, Commitments, Fixed Rates	28,000
Loans and Leases Receivable, Net Amount	(5,629)
Notes Receivable Funding Commitment	22,371
Senior Living Communities [Member]
Loans and Leases Receivable, Commitments, Fixed Rates	29,000
Loans and Leases Receivable, Net Amount	(17,261)
Notes Receivable Funding Commitment	11,739
Notes Receivable Remain Unfunded [Member]
Loans and Leases Receivable, Net Amount	$ (74,761)

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Commitments And Contingencies Commitments and Contingencies (Schedule of Lease Commitments) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Maximum Commitment For All Active Development Projects	$ 129,800
Construction and Development Costs	(74,592)
Remaining Unfunded Development Commitment	55,208
Capital Addition Purchase Commitments [Member] | Ensign Group [Member]
Maximum Commitment For All Active Development Projects	56,000
Construction and Development Costs	(14,000)
Remaining Unfunded Development Commitment	42,000
Development Commitment [Member] | Bickford Senior Living [Member]
Maximum Commitment For All Active Development Projects	56,500
Construction and Development Costs	(53,676)
Remaining Unfunded Development Commitment	2,824
Development Commitment [Member] | Chancellor Healthcare [Member]
Maximum Commitment For All Active Development Projects	650
Construction and Development Costs	(52)
Remaining Unfunded Development Commitment	598
Capital Improvement Commitment [Member] | Bickford Senior Living [Member]
Maximum Commitment For All Active Development Projects	2,400
Construction and Development Costs	0
Remaining Unfunded Development Commitment	2,400
Capital Improvement Commitment [Member] | East Lake Capital [Member]
Maximum Commitment For All Active Development Projects	400
Construction and Development Costs	0
Remaining Unfunded Development Commitment	400
Capital Improvement Commitment [Member] | East Lake / Watermark Retirement [Member]
Maximum Commitment For All Active Development Projects	10,000
Construction and Development Costs	(4,016)
Remaining Unfunded Development Commitment	5,984
Capital Improvement Commitment [Member] | Sante Partners Commitment [Member]
Maximum Commitment For All Active Development Projects	3,500
Construction and Development Costs	(2,621)
Remaining Unfunded Development Commitment	879
Capital Improvement Commitment [Member] | Village Concepts [Member]
Maximum Commitment For All Active Development Projects	350
Construction and Development Costs	(227)
Remaining Unfunded Development Commitment	$ 123

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Commitments And Contingencies Commitments and Contingencies (Schedule of Loss Contingencies) (Details)	3 Months Ended
	Mar. 31, 2017 USD ($)
Maximum Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	$ 17,430,000
Contingent Amount Funded [Member]
Lease Incentive Commitment Assessed As Not Probable	0
Remaining Unfunded Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	17,430,000
East Lake Capital [Member] | Maximum Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	8,000,000
East Lake Capital [Member] | Contingent Amount Funded [Member]
Lease Incentive Commitment Assessed As Not Probable	0
East Lake Capital [Member] | Remaining Unfunded Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	8,000,000
Sycamore Street [Member] | Maximum Contingent Amount [Member]
Letters of Credit Outstanding, Amount	1,930,000
Sycamore Street [Member] | Contingent Amount Funded [Member]
Letters of Credit Outstanding, Amount	0
Sycamore Street [Member] | Remaining Unfunded Contingent Amount [Member]
Letters of Credit Outstanding, Amount	1,930,000
Ravn Senior Solutions [Member]
Lease Incentive Commitment Assessed As Not Probable	1,500,000
Ravn Senior Solutions [Member] | Maximum Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	1,500,000
Ravn Senior Solutions [Member] | Contingent Amount Funded [Member]
Lease Incentive Commitment Assessed As Not Probable	0
Ravn Senior Solutions [Member] | Remaining Unfunded Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	1,500,000
Prestige Senior Living [Member]
Lease Incentive Commitment Assessed As Not Probable	1,000,000
Prestige Senior Living [Member] | Maximum Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	1,000,000
Prestige Senior Living [Member] | Contingent Amount Funded [Member]
Lease Incentive Commitment Assessed As Not Probable	0
Prestige Senior Living [Member] | Remaining Unfunded Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	1,000,000
The Lasalle Group [Member]
Lease Incentive Commitment Assessed As Not Probable	5,000,000
The Lasalle Group [Member] | Maximum Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	5,000,000
The Lasalle Group [Member] | Contingent Amount Funded [Member]
Lease Incentive Commitment Assessed As Not Probable	0
The Lasalle Group [Member] | Remaining Unfunded Contingent Amount [Member]
Lease Incentive Commitment Assessed As Not Probable	$ 5,000,000

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Investment And Other Gains (Schedule of Investment And Other Gains) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Investment And Other Gains [Abstract]
Gain on sale of real estate	$ 50	$ 1,654
Gains on sales of marketable securities	10,038	11
Investment and other gains	$ 10,088	$ 1,665

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Investment And Other Gains Investment And Other Gains (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2015
Marketable Securities, Realized Gain (Loss)	$ 10,038	$ 11
Proceeds from sales of marketable securities	18,182	17,049
Marketable securities		$ 0	$ 11,745
Available-for-sale Securities, Amortized Cost Basis			$ 1,680
2017 Sales Transaction [Member]
Proceeds from sales of marketable securities	11,718
2016 Sales Transaction [Member]
Proceeds from sales of marketable securities	$ 6,464

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Share-Based Compensation Share-Based Compensation (Schedule of Stock Option Valuation Assumptions) (Details)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Schedule of Stock Option Valuation Assumptions [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	5.30%	6.20%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	19.70%	19.10%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	3 years 4 months	2 years 11 months 4 days
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	1.49%	0.91%

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Share-Based Compensation (Schedule Of Stock Option Activity) (Details) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Options outstanding, January 1	541,679	741,676
Options outstanding, March 31	979,178	1,085,010
Options exercisable, March 31	585,827	731,662
2012 Plan [Member]
Options granted	485,000	470,000
Options exercised	(25,833)	126,666
Options forfeited	(6,668)	0
2005 Plan [Member]
Options exercised	(15,000)	0

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Share-Based Compensation (Narrative) (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) $ / shares shares	Mar. 31, 2016 USD ($) $ / shares	May 07, 2015 shares	May 31, 2012 shares	May 31, 2005 shares
Nonemployee director annual stock grants | shares	20,000
Stock or Unit Option Plan Expense	$ 1,523	$ 979
Unrecognized compensation cost	$ 1,644
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares	$ 5.75	$ 3.65
2012 Plan [Member]
Shares available for grants | shares	961,668		3,000,000	1,500,000
Stock Option Plan, Award Vesting Period	5 years
Common stock on date granted term period, years	10
Prior To Shareholder Approval of Increase [Member]
Nonemployee director annual stock grants | shares	15,000
2005 Plan [Member]
Shares available for grants | shares					1,500,000
Stock Option Plan, Award Vesting Period	10 years
Common stock on date granted term period, years	10
Expected To Be Recognized During 2015 [Member]
Unrecognized compensation cost	$ 1,027
Expected To Be Recognized During 2016 [Member]
Unrecognized compensation cost	552
Expected To Be Recognized During 2017 [Member]
Unrecognized compensation cost	$ 65

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Earnings and Dividends Per Share (Summary Of Calculation Of Basic And Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Earnings Per Share [Abstract]
Net income attributable to common stockholders	$ 44,230	$ 32,725
BASIC:
Weighted Average Number of Shares Outstanding, Basic	39,953,804	38,401,647
DILUTED:
Weighted average common shares outstanding, diluted	39,953,804	38,401,647
Stock options, diluted	56,910	13,144
Incremental Common Shares Attributable to Dilutive Effect of Conversion of Debt Securities	98,048	0
Average dilutive common shares outstanding	40,108,762	38,414,791
Income (Loss) from Continuing Operations, Per Basic Share	$ 1.11	$ 0.85
Income (Loss) from Continuing Operations, Per Diluted Share	$ 1.10	$ 0.85
Incremental shares excluded since anti-dilutive:
Stock options with an exercise price in excess of the market price for our common shares	19,851	75,050
Common Stock, Dividends, Per Share, Declared	$ 0.95	$ 0.90

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Fair Value Of Financial Instruments (Schedule Of Assets And Liabilities Measured On A Recurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Inputs, Level 2 [Member]
Cash Flow Hedge Derivative Instrument Liabilities at Fair Value	$ 3,022	$ 4,279
Common Stock, Healthcare REIT [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale Securities	$ 0	$ 11,745

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Fair Value of Financial Instruments (Fair Value Measurements, Nonrecurring) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans and Leases Receivable, Net Amount	$ 150,098	$ 133,493
Variable Interest Rate Debt [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Fair Value Disclosure	437,000	408,000
Reported Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans and Leases Receivable, Net Amount	150,098	133,493
Reported Value Measurement [Member] | Variable Interest Rate Debt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Fair Value Disclosure	434,109	404,828
Reported Value Measurement [Member] | Fixed Interest Rate Debt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Fair Value Disclosure	711,582	711,153
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans and Leases Receivable, Net Amount	148,434	133,229
Estimate of Fair Value Measurement [Member] | Fixed Interest Rate Debt [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Fair Value Disclosure	$ 708,158	$ 706,332